Syed Rahman considers the Financial Conduct Authority’s plans for 2026
The UK’s Financial Conduct Authority (FCA) intends to introduce an authorisation regime for new crypto firms in 2026.
The regulator plans to consult with firms and devise new rules to create a stricter regulatory regime for crypto. The FCA’s director of payments and digital assets, Matthew Long, has said that the “impending gateway regime" that is set to be introduced next year will actually be a new authorisation regime for crypto companies that will differ from the current anti-money laundering (AML) one.
Firms will need to do more than merely register to comply with AML rules. The new regime will consist of rules for a suite of offerings and firms will have to go through a new procedure to obtain formal approval from the FCA.
With this in mind, the FCA is set to release papers this year on matters including stablecoins, trading platforms, staking and prudential crypto exposure. The new regime will go live following the publication next year of the final policy papers.
The FCA opened its AML register for firms in 2020. Since then, the FCA has received 368 applications from firms. But of these, only 50 firms (less than 14% of those who applied) have been approved.
Areas
The new regime, when it is devised and introduced, will need to address a number of key areas.
It will have to:
- Provide clear definitions of different cryptoassets such as stablecoins, utility tokens and (Non-Fungible Token) NFT’s so that companies have more clarity.
- Ensure that there is a clearer, streamlined and not too time-consuming process for companies seeking approval from the FCA.
- Make sure that anti-money laundering and know your customer compliance is maintained and monitored following approval.
It is, however, not hard to foresee the possible practical difficulties. While it is easy to pinpoint the goals of the new regime, implementing it will be more difficult. The new regime will have stringent rules for companies to obtain approval and, while the FCA has consulted with industry members, it remains to be seen how the new regime will be beneficial for companies. To take one example, there is the challenge of ensuring there is a level playing field for the smaller companies and start-ups that are lining up alongside the bigger figures in the sector. There is also the task of implementing a company-friendly regime while upholding the UK’s high regulatory standards.
Already-registered companies will be able to operate normally under the licence they have been granted. But as the new regime is expected to come with wider permissions, such companies are likely to want to obtain these, and so they can be expected to apply and be approved just as companies that are not already registered.
Triggered
It is difficult to pinpoint any single event that has triggered the move to create a crypto regime. It reflects a broader, general trend worldwide towards crypto regulation as regulators have sought to achieve a fair balance between innovation and consumer protection.
The FCA is looking to devise a regime that protects consumers in a world where crypto has become mainstream. As the worth of the industry continues to increase, there is a need for the UK to ensure it welcomes companies within the crypto industry and does not fall behind.
The new regime can be viewed as an attempt to show that the UK is open for business for those looking to innovate and not exploit customers.
