On 2 May 2025, the Financial Conduct Authority (FCA) published Discussion Paper 25/1: Regulating cryptoasset activities (DP25/1).

Background

DP25/1 is the latest policy publication in the FCA’s crypto roadmap on the future of cryptoasset regulation. So far, the FCA has published DP23/4 in November 2023 on developing a regime for fiat-backed stablecoins and in December 2024 it published DP24/4 outlining proposed frameworks for admissions and disclosures and a market abuse regime for cryptoassets.

On 29 April 2025, HM Treasury (HMT) published a draft statutory instrument (SI), the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, which sets out provisions to create a new regulatory regime for cryptoassets. The draft SI included amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to:

  • Define “qualifying cryptoassets” and “qualifying stablecoin”.
  • Classify “qualifying cryptoassets” and “qualifying stablecoin” as specified investments under the Financial Services and Markets Act 2000.
  • Specify certain activities relating to these assets as regulated activities, meaning that persons carrying on those activities will need to be authorised for that activity by the FCA.

Proposals

The purpose of DP25/1 is to open a discussion on the features of the future regime for cryptoassets and the FCA is seeking views on how it regulates trading platforms, intermediaries, staking, lending and borrowing, and decentralised finance. It is also seeking feedback on the use of credit to purchase cryptoassets.

Structure

The structure of the DP25/1 is as follows:

  • Chapter 2: Cryptoasset trading platforms (CATPs). The FCA’s proposed policy has been informed by the current rules and obligations applied to trading venues in traditional financial markets. A summary of the key policy proposals can be found in paragraph 2.6.
  • Chapter 3: Cryptoasset intermediaries. The FCA states that its proposed rules are in line with international frameworks. It is considering rules to regulate the conduct of intermediaries in line with the principle of ‘same risk, same regulatory outcome’ wherever possible, taking into account the specific features of the crypto market. A summary of the key policy proposals can be found in paragraph 3.10. Among other things the FCA is considering the necessity of pre-trade transparency requirements and the potential shape and form of post-trade transparency requirements relevant for some crypto intermediaries.
  • Chapter 4: Cryptoasset lending and borrowing. The FCA’s assessment of the cryptoasset lending and borrowing sector identifies various current business models and in DP25/1 it has broadly grouped these into two categories: ‘cryptoasset lending’ and ‘cryptoasset borrowing’. Among other things the FCA is proposing to restrict firms from offering these products to retail consumers in their current structure although it welcomes feedback on this position. The FCA sets out potential requirements from paragraph 4.12 onwards.
  • Chapter 5: Restricting the use of credit to purchase cryptoassets. The FCA is concerned that consumers buying cryptoassets with credit may take on unsustainable debt. Therefore it is exploring whether it would be appropriate to restrict firms from accepting credit as a means for consumers to buy cryptoassets. The FCA’s initial expectation is that qualifying stablecoins issued by an FCA authorised stablecoin issuer would be exempt from potential restrictions, and firms would not be restricted from offering credit options for the purchase of these qualifying stablecoins.
  • Chapter 6: Staking. The FCA notes that there are number of risks regarding staking including that consumers may not fully understand the blockchain validation process and its technology. The FCA sets out a summary of its key proposals in paragraph 6.8 and this includes that firms must get retail customers’ explicit consent on the amount of staked cryptoassets, conditions for payment, repayment, return of cryptoassets and fee charging arrangements, before the firm stakes their cryptoassets.
  • Chapter 7: Decentralised finance (DeFi). The FCA notes that in line with HMT’s intention in the published draft SI, DeFi activities are not covered by the regime where they are truly decentralised. When DeFi involves the proposed regulated activities, and where there is a clear controlling person(s) carrying on an activity, then these activities will be covered by the regime. To achieve the same regulatory outcomes for the same activity, the FCA proposes that the same set of requirements outlined in previous chapters 2-6 will apply. In addition, to help firms understand their obligations, the FCA intends to introduce guidance. Following the publication of DP25/1 the FCA will host a stakeholder forum to foster open dialogue and get insights from experts and market participants.

Next steps

The deadline for comments on DP25/1 is 13 June 2025.

The FCA will consider the feedback and decide on its next steps. It will consult on any proposals in DP21/1 if it proposes to adopt them as part of its final rules.

In Q2 2025, the FCA will be publishing a Consultation Paper (CP), consulting on the proposed rules and guidance for issuing a qualifying stablecoin, safeguarding qualifying cryptoassets and specified investment cryptoassets. This will be published alongside a CP on the prudential framework for cryptoassets and prudential requirements for qualifying stablecoins and safeguarding. These activities will also be subject to wider conduct and firm standards, such as the Consumer Duty and rules within the Conduct of Business Sourcebook. The FCA will consult on these standards in a CP on conduct and firm standards for RAO activities planned for Q3 2025.

Comment

Hannah Meakin commented:

“The FCA’s discussion paper represents a significant step towards establishing a comprehensive regulatory framework for cryptoasset activities in the UK. By seeking views on intermediaries, staking, lending and borrowing, and decentralised finance, the FCA is looking to address the current regulatory gaps and provide greater clarity for firms operating in this rapidly evolving sector.

“The discussion about potential requirements for cryptoasset exchanges demonstrates some creativity and sophistication of thinking about how to balance the multiple objectives of user, industry and regulator. The branch and subsidiary combination idea is of particular interest.

“There are of course numerous angles to consider, but the FCA’s first steps in thinking through the complexities and practicalities for those trying to operate global businesses – in compliance with different local regulatory regimes – is welcome.

“The inclusion of considerations around the use of credit for purchasing cryptoassets is also notable and arguably reflects the FCA’s strong stated commitment to consumer protection and market integrity. The FCA is clearly attempting to create a regime that effectively balances innovation with appropriate levels of oversight, yet this is no easy feat and the proof will be in the pudding as to whether they can get this balance right.”