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Crypto has become a vital component of the UK financial landscape, providing opportunities for investments, payments and technological advancements. Recent studies have shown that about 12% of adults in the UK own crypto assets, and this number doesn’t seem to be slowing down. However, This rapid expansion has increased risks like fraud and market instability.

Due to this increased risk in the crypto market, the Financial Conduct Authority (FCA) has taken an active stance in regulating the crypto market. Let’s look at recent updates on the actionable steps proposed by the FCA in the crypto market and how individuals and businesses can adapt to them.

Understanding the FCA’s Role in Crypto

Have you ever wondered about the UK FCA’s role in the crypto market? Well, they play three significant roles:

1. Registration Oversight

The FCA ensures that trading platforms in the UK meet set standards before operating in the country. To confirm that they meet this standard, the authority requires these companies or trading platforms to register with them (FCA) and have formal and official approval to operate in the country. That’s why it is essential for you, or any crypto enthusiast who wants to test the waters of the crypto market, to use an FCA-approved trading platform like OANDA Crypto to ensure transparency and compliance with UK regulations. This also means that, to a certain level, the authority determines what you have to do to register with these companies.

2. Developing Regulatory Frameworks

With the crypto market constantly evolving, the FCA is committed to building a solid and transparent regulatory structure to keep up with its pace. However, the regulations are being formulated at a much slower rate to the changes in the market, but the current level of compliance required to profit from this market is still quite high. So, as a crypto enthusiast, investor or trader, you must know and abide by these regulatory structures.

3. Education and Awareness

Due to the high risk of operating in the crypto market, educating yourself is crucial. The FCA plays a significant role in ensuring that consumers are educated about the risks associated with cryptocurrencies, issuing frequent public warnings about these risks, and even creating guides to help you make well-informed decisions in the crypto market.

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The FCA’s Future Plans

Although the FCA has laid down some policies guiding the crypto market in the UK, there’s still a long way to go, and it seems they know that. On November 26th, 2024, the authority published press releases, blogs, and guides on how to better regulate the rapidly evolving crypto space. The implementation of these plans is proposed to start now and run into 2026.

If you’re wondering about their plans, here’s a simple breakdown of what’s coming and what it could mean for you.

What Is The FCA Aiming For?

Let’s look at some of the things that the authority wants to achieve concerning the current happenings in the crypto space:

• Protecting Consumers: Over the past few years, the crypto market has seen a rising number of scams and deception, which the FCA aims to tackle and reduce considerably. They plan to create a stronger regulatory rule that protects individuals and businesses while also ensuring that crypto asset users are well-informed about the risks associated with crypto investments.

• Maintaining Market Fairness: If you’ve ever felt the crypto market is unfair, you’re right. Over the last few years, experts have agreed that some bad players manipulate the crypto market. So, one of the authority’s goals is to create a fair, compliant, and transparent crypto market where all participants comply with the same standards to prevent market manipulation and ensure that trading platforms in the UK operate with integrity. 

• Encouraging Innovation: The FCA has also stated that it is open to supporting new ideas and technologies in the crypto space to keep up with the evolving economy.

What Areas Will Be Regulated?

With these goals in mind, Let’s look at some of the areas in the crypto space that would experience some level of change in the next two years:

• Consumer Protection: The FCA’s current consumer protection policies will be better enforced over the next few years. This means that the authority will require crypto firms to issue clear, detailed risk warnings about their products and comply with anti-money laundering (AML) protocols.

• Market Integrity: This is another major priority for the authority. Over the next few years, they plan to regulate the market properly to prevent market manipulation and insider trading.

• Firm standards: The licensing and registration standards will also be updated, ensuring that all crypto firms are trustworthy and well-governed.

• Product Oversight: Crypto assets, including stablecoins and security tokens, will also be well regulated by the authority. They plan on introducing tailored rules to address their unique risks and uses.

These regulations aim to create a safer and more transparent environment for crypto users and businesses. According to the authority, they plan to finalise and implement the rules across the crypto market in the United Kingdom by 2026.

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Preparing for the Emerging FCA’s Policies

The crypto market will undoubtedly enter a more regulated phase with all these developments. So, investors, traders, and businesses must learn to adapt well to thrive in this evolving environment.

Let’s discuss a few ways to prepare yourself for this ever-evolving environment.

Preparing Yourself as a Crypto Investor

1. Educate Yourself on New Regulations

First, you must stay informed (reading this is a good start). Over the next few years, the FCA will announce specific plans and rules that you must oblige, and that will be for your protection. These rules will help you make well-informed decisions and comply with the new standards.

2. Audit Your Investment Portfolio

You must start proactively assessing how the FCA’s changes might impact your current investments. You can start by working with a financial advisor who can help you determine whether your crypto asset holdings comply with the new rules. Also, this is an excellent opportunity to remind you to consider diversifying your crypto assets.

Preparing Yourself As a Crypto Business

1. Register with the FCA

Ensure your crypto business complies with all the FCA’s registration requirements, including submitting detailed information about your operations and anti-money laundering measures.

2. Enhance Transparency and Communication

You should also review all promotional materials and ensure that they provide clear, accurate, and comprehensive information about your offer.

3. Adopt a Proactive Strategy 

Audit your business and address any compliance gaps you find. It is also essential to invest in compliance training for your team and seek legal expertise to interpret and apply the FCA’s regulations effectively.

Final Thoughts

To adapt to the regulatory changes proposed by the FCA in the crypto market, you must start taking proactive measures. Although navigating these regulatory changes may be challenging, they are worth the inconvenience. Remember, the FCA aims to improve market stability, enhance consumer trust, and ensure better protection against fraud. So, whether you are an investor or a business, following the regulations will benefit and protect your interests.