The Financial Conduct Authority (FCA) has unveiled a comprehensive plan to regulate the UK’s growing crypto industry, aiming to establish a clear and robust framework by 2026. This initiative includes setting standards for capital requirements, insider trading, and execution protocols, aligning crypto firms with traditional financial regulations. The FCA’s roadmap outlines key milestones, such as a discussion paper on market abuse and insider information slated for late 2024, followed by consultations on order handling, execution, custody, and a new prudential rulebook covering capital, liquidity, and risk management in the first half of 2025.
Recent research by the FCA indicates that crypto ownership among UK adults has risen to 12%, equating to approximately seven million individuals, up from 10% in 2022. The average holding has increased from £1,595 to £1,842. Despite the unregulated and high-risk nature of crypto investments, a significant portion of investors view them as part of a broader investment portfolio, with 26% using long-term savings for crypto purchases. Notably, 12% of crypto owners mistakenly believe they are entitled to compensation if they incur losses, underscoring the need for enhanced consumer education.
The FCA emphasises that consumers investing in crypto-assets should be prepared to lose all their money due to the sector’s volatility and lack of regulation. To address these challenges, the FCA is working closely with the government and international counterparts to develop regulations that foster innovation while ensuring market integrity and consumer protection. The upcoming framework aims to support a safe, competitive, and sustainable crypto sector in the UK, reflecting the FCA’s commitment to adapting to the evolving financial landscape.
We asked our Chief Legal & Product officer Ciarán McGonagle to add some colour to FCA’s roadmap through a Tokenovate lens:
How important/impactful do you expect the FCA’s regulatory efforts will be for the crypto industry?
DLT technology is rapidly evolving from speculative use cases to driving transformative change as the foundation of secure, efficient, and transparent financial infrastructure. The FCA’s roadmap reflects this shift, striking a critical balance while recognising the dual nature of the crypto market. Robust consumer protections are essential for retail investments, but the tokenisation of wholesale capital markets demands a different approach.
At Tokenovate, we believe financial markets are at a historic inflection point. The FCA’s roadmap aligns with our vision: leveraging the convergence of legal, regulatory, and technological standards to strategically transform global financial systems.
The ambition underpinning the FCA’s roadmap makes it clear that the market has crossed the Rubicon. Incremental change is no longer enough. The UK must focus on laying the foundations for an interoperable, digital-first financial framework – one that embeds rights, rules, and permissions directly into trade life-cycle and settlement workflows. This is a pivotal step toward establishing the UK as a leader in a data-driven, tokenised financial ecosystem, aligned with Tokenovate’s mission to create a more efficient, automated and equitable financial system.
How can the FCA ensure it strikes the right balance between ensuring consumer protection and enabling market growth, innovation, and competition?
Tokenovate is eager to engage with upcoming consultations, particularly those clarifying the regulatory framework for wholesale tokenisation.
To achieve the UK’s growth objectives, the FCA must balance consumer protections with the growth potential of institutional tokenisation. Transparency and governance are, of course, crucial for protecting retail investors in risky crypto-assets. But wholesale tokenisation needs a tailored approach. The Digital Securities Sandbox is a powerful example of the kind of innovation-friendly initiatives that we need to see more of, allowing firms to test solutions that drive economic expansion. Proportional enforcement and avoiding retail-focused constraints in institutional markets will enable scalable tokenisation, attract global investment, and position the UK as a leader in a data-driven, tokenised financial ecosystem.
