UK FCA Proposes Waiving Some TradFi Rules for Crypto Firms
Key Takeaways
Tailored Regulation for Crypto: The FCA is considering exempting crypto firms from specific traditional finance rules—such as cooling-off periods, customer conduct obligations, and some management oversight requirements—to reflect the unique nature of digital assets.
Focus on Risk Areas: While easing some obligations, the FCA plans to strengthen rules on operational resilience, cybersecurity, and anti-money laundering (AML) to address the sector’s most significant vulnerabilities.
New Framework by 2026: The proposals are currently under consultation through late 2025, with a finalised regulatory framework expected to come into effect in 2026.
The UK Financial Conduct Authority (FCA) has announced draft proposals to modify how certain traditional finance (TradFi) regulatory rules apply to cryptocurrency companies.
Overview
On Wednesday, the FCA published a consultation paper that set out minimum standards that crypto companies must meet once the industry is brought under its remit.
Executive director of payments and digital finance, David Geale, said,
“We want to develop a sustainable and competitive crypto sector, balancing innovation, market integrity and trust.”
Aiming to balance innovation, market competitiveness, and consumer protection, the FCA seeks input on a tailored regulatory framework that would exempt crypto firms from several standard requirements while preserving some safeguards.
Geale highlighted that the proposals will not erase investment risks, but will help companies meet common standards so consumers understand what to expect better. Final rules are expected in 2026.
Key TradFi Rules Under Review for Exemption
Some of the TradFi regulatory principles that the FCA is considering waiving or modifying for crypto firms include:
- Business conduct and customer treatment: Crypto firms may be exempt from certain obligations around conducting business
“with integrity,”
using
“skill, care and diligence,”
and giving due regard to customers’ interests.
- Consumer Duty: The FCA is consulting on whether the new Consumer Duty—introduced to ensure financial firms deliver good outcomes for retail clients—should apply immediately, at all, or in a modified form to crypto asset activities.
- Rights such as cooling-off/cancellation periods: Recognising the always-on, volatile nature of crypto asset markets, the FCA proposes not applying cancellation rights or cooling-off periods to crypto transactions.
- Senior management, systems & controls obligations: Crypto firms might face lighter requirements for senior management oversight and internal control structures, reflecting the view that they do not pose the same systemic risk as banks or large investment firms.
What’s Being Strengthened and What’s Next
While the FCA seeks to ease some requirements, the regulator is also proposing tighter rules in other areas to address specific risks inherent in the crypto sector:
- Operational and cybersecurity resilience: The rise in hacks and cyberattacks (such as the significant Bybit breach) has prompted the FCA to insist on strong operational risk standards.
- Financial crime controls: Firms will still be required to maintain robust anti-money laundering (AML) and fraud prevention measures.
The FCA has published a consultation paper on the timeline and seeks stakeholder feedback through October and November 2025. Under a new regulatory regime, the final rules for crypto firms are expected to come into force in 2026.