FCA Consults on Application of FCA Handbook to Cryptoasset Activities

The Financial Conduct Authority (FCA) has published a consultation (CP25/25) on the application of the FCA Handbook to regulated cryptoasset activities. If the proposals therein are implemented by the FCA, it would mark another step in the transition from limited anti-money laundering and financial promotion oversight to more comprehensive regulation, resulting in cryptoasset firms being subject to requirements comparable to traditional financial services firms.

CP25/25 follows HM Treasury’s April 2025 draft Statutory Instrument to create new regulated activities for cryptoassets under the Financial Services and Markets Act 2000 (FSMA), as well as its policy note detailing the intended policy outcomes of these provisions. 

Key Proposals

The proposals are based on the principle of “same risk, same regulatory outcome”, applying existing standards with modifications to address the unique risks of cryptoassets and business models in the sector. 

1. Application of FCA Handbook Standards

CP25/25 proposes to apply certain cross-cutting Handbook rules to cryptoasset firms, including the following:

• High Level Standards (PRIN, SYSC, COND, GEN): fundamental obligations such as integrity, financial prudence, and proper market conduct;
• Supervision Requirements (SUP): information gathering, auditor requirements, and notification obligations; and
• Code of Conduct (COCON) and Fit and Proper Test (FIT): standards for employees and senior personnel.

2. Governance and Senior Management

CP25/25 sets out proposals for applying the SYSC sourcebook to cryptoasset firms, setting standards for governance, systems, controls, whistleblowing, and conflicts of interest. Under SYSC, cryptoasset firms will generally be classified as “other firms” rather than “common platform firms”.

The Senior Managers & Certification Regime (SM&CR) shall be extended to cryptoasset firms, requiring clear allocation of responsibilities, regular fitness and propriety assessments, and personal accountability for senior managers. Firms will be classified as “Core” or “Enhanced”, with enhanced firms (e.g., large stablecoin issuers or custodians) subject to additional requirements such as management responsibilities maps.

All cryptoasset firms will be required to allocate senior management functions depending on their firm classification, including the Compliance Oversight Function (SMF16). Requirements to certify relevant staff under the Certification Regime, including those involved in client dealing and proprietary trading, will also apply.

3. Operational Resilience

The operational resilience framework under SYSC 15A will apply to all cryptoasset firms, regardless of size or activity. This reflects the sector’s reliance on technology and the potential for significant consumer harm from operational failures. Such operational resilience requirements include:

• identifying important business services;
• setting impact tolerances;
• mapping exercises; and
• conducting scenario testing.

The use of permissionless distributed ledger technologies will not be treated as outsourcing under SYSC 8. However, the FCA expects cryptoasset firms to remain responsible for managing their own operational resilience.

4. Financial Crime

CP25/25 proposes to subject cryptoasset firms to the full financial crime framework applicable to Part 4A FSMA authorised firms, including:

• systems and controls addressing money laundering, terrorist financing and proliferation financing risks;
• appointment of a Money Laundering Reporting Officer; and
• familiarity with the Financial Crime Guide requirements.

5. Conduct of Business, Product Governance and the Consumer Duty

The FCA is consulting on the application of the Conduct of Business Sourcebook (COBS) and Product Intervention and Product Governance Sourcebook (PROD) to cryptoasset firms. Proposals include:

• client categorisation rules;
• disclosure requirements on service and safeguarding;
• strengthened appropriateness testing; and
• periodic client reporting for cryptoassets and client money.

Additionally, the FCA is considering whether to apply the Consumer Duty to cryptoasset activities, or to introduce tailored rules to achieve comparable consumer protection outcomes.

6. Environmental, Social and Governance (ESG)

CP25/25 seeks views on the application of the ESG sourcebook to cryptoasset firms. The FCA’s current preferred approach is to apply ESG to cryptoasset firms as it applies generally to all authorised firms, including the anti-greenwashing rules. No new cryptoasset-specific sustainability disclosures are proposed at this stage.

Next Steps

CP25/25 closes for responses to the discussion chapters (i.e., chapters 6-7) on 15 October 2025 and for responses to the consultation chapters (i.e., chapters 1-5) on 12 November 2025. The FCA expects to consult on the issues raised in the discussion chapters later in 2025, before finalising and publishing the new rules in 2026, with the regime targeted to go live that year - though precise timing will depend on Treasury legislation and parliamentary process.

Concluding Remarks

CP25/25 marks a significant step towards establishing a comprehensive and proportionate regulatory framework for cryptoasset activities in the UK. The proposed application of the FCA Handbook to cryptoasset firms aims to raise standards, reduce consumer harm, and support the growth and competitiveness of the UK cryptoasset sector, while recognising the unique risks and characteristics of cryptoassets.

CP25/25 is available here.

More information on HM Treasury’s draft Statutory Instrument and policy note is available here.

James Wells, trainee in the Financial Markets and Funds practice, contributed to this advisory.