FCA Introduces New Cryptocurrency Regulations as UK Adoption Reaches 7 Million

TLDR

• FCA released discussion paper on tightening UK crypto market rules, focusing on abuse prevention and transparency, with 12% of UK adults (7 million people) now owning crypto assets
• Proposal calls for crypto trading platforms to implement stronger internal controls and information sharing to detect fraud
• Average crypto holdings among UK adults increased from £1,595 to £1,842, with 90% of crypto firm applications rejected last year due to weak anti-money laundering controls
• FCA issued over 450 consumer alerts against unauthorized crypto promotions and emphasized crypto remains high-risk and largely unregulated
• Stakeholder feedback is requested by March 14, 2025, to inform final rules, while Bank of England requires firms to report crypto exposures by March 2025

The Financial Conduct Authority (FCA), Britain’s financial regulator, has unveiled a new discussion paper outlining plans to strengthen oversight of the country’s cryptocurrency market. This development comes as recent data shows cryptocurrency ownership in the UK has reached an all-time high, with 7 million adults now holding digital assets.

The comprehensive proposal, released on Monday, addresses growing concerns about market abuse and transparency in the crypto sector. At its core, the initiative aims to establish clearer guidelines for both companies and consumers operating in this rapidly evolving space.

According to the FCA’s latest research, which surveyed 2,199 UK adults, cryptocurrency ownership has increased from 10% to 12% of the adult population. This rise represents a jump from 5 million holders in 2022 to 7 million in 2024, highlighting the growing mainstream acceptance of digital assets.

The financial commitment of crypto investors has also grown. The average value of cryptocurrency holdings per person has risen from £1,595 to £1,842, indicating increased confidence among investors despite market volatility.

Under the proposed framework, authorized cryptocurrency trading platforms would need to implement robust internal measures to prevent market abuse. The FCA emphasizes the importance of information sharing between platforms to better detect and prevent fraudulent activities.

The regulator’s concerns appear well-founded, given recent statistics. In the past year, the FCA rejected 90% of cryptocurrency firm applications due to inadequate anti-money laundering controls. Additionally, the authority issued more than 450 consumer alerts regarding unauthorized cryptocurrency promotions during the same period.

Despite the growing adoption, the FCA maintains a cautionary stance. The regulator explicitly warns that cryptocurrency assets remain high-risk and largely unregulated, stating that investors “should be prepared to lose all your money” if things go wrong.

The proposal builds on insights gathered from cryptocurrency roundtables held earlier this year, incorporating feedback from various industry stakeholders and government consultations. This collaborative approach aims to create a more comprehensive and effective regulatory framework.

In parallel with the FCA’s initiatives, the Bank of England has increased its oversight of the sector. Financial institutions must now report their cryptocurrency exposures by March 2025, adding another layer of regulatory supervision to the industry.

The discussion paper’s release has already impacted some service providers. For instance, the Telegram Wallet app recently suspended its UK operations while seeking regulatory approval from the FCA, demonstrating the practical effects of increased regulatory scrutiny.

The FCA’s approach focuses on creating what it calls “clear and consistent ‘rules of the game'” for industry participants. This framework aims to foster sustainable investment and long-term growth within the UK’s borders while protecting consumers.

The regulator emphasizes that proper admissions, disclosures, and market abuse prevention measures are essential for maintaining market integrity and enabling informed financial decisions by investors.

To ensure comprehensive input, the FCA is actively seeking feedback from various stakeholders, including industry participants, policymakers, and consumer groups. This consultation period will remain open until March 14, 2025.

Following the feedback period, the FCA plans to release a Consultation Paper before implementing final rules. This phased approach allows for refinement of the proposed regulations based on industry input and changing market conditions.

The timing of these regulatory developments coincides with broader global efforts to establish clearer frameworks for cryptocurrency markets, positioning the UK as a key player in shaping the future of digital asset regulation.