The UK’s Financial Conduct Authority (FCA) has released a discussion paper addressing crypto-asset admissions, disclosure frameworks, and market abuse regimes, setting the stage for comprehensive cryptocurrency legislation by 2026.
Key proposals include a ban on public offerings of crypto-assets, with limited exceptions, and enhanced oversight of cryptocurrency exchanges.
Under the proposed regime, new public crypto-asset offerings will be permitted only if conducted through regulated cryptocurrency exchanges or targeted exclusively at qualified investors.
This move shifts responsibility to exchanges to carry out rigorous due diligence on listings and to reject unsuitable offerings. Exchanges may also face prudential requirements under the new rules.
Currently, UK crypto oversight is limited to anti-money laundering compliance and marketing regulations.
The FCA’s new framework aims to bridge these gaps, with a focus on balanced disclosure requirements. While comprehensive information for consumers is crucial, the FCA stresses avoiding excessive documentation that could obscure critical details.
Issuers will be encouraged to include forward-looking statements, protected under the UK’s concept of Protected Forward-Looking Statements (PFLS). Such statements carry liability only if proven knowingly false or recklessly misleading.
The UK’s National Storage Mechanism (NSM), an online repository for regulated information such as prospectuses, will also include details on crypto-assets listed on exchanges.
The paper proposes measures to address market abuse, acknowledging the challenges posed by crypto’s fragmented and cross-border nature, as well as the absence of clear issuers in some cases (e.g., Bitcoin).
The FCA plans to introduce rules prohibiting insider trading, mandating prompt disclosure of inside information by crypto exchanges, and banning market manipulation.
The regulator also aims to address issues surrounding crypto-asset listings initiated without the issuer’s involvement. Responsibility for timely dissemination of inside information will fall on the entity requesting the listing.
The FCA is considering adapting the UK’s existing centralized announcement service, currently used for traditional markets, for crypto-assets.
The discussion paper includes cryptocurrencies and stablecoins under its scope, although a separate consultation on fiat-referenced stablecoins is expected later.
In late 2023, the FCA and the Bank of England jointly issued a discussion paper on stablecoins, signalling further regulatory developments.
The FCA’s regulatory process involves three stages: a discussion paper, followed by a consultation period, and then finalising policy.
This phased approach reflects the UK’s commitment to ensuring robust, adaptable, and proportionate crypto regulations as it moves towards implementation by 2026.
