FCA CP25/25 – Application of FCA Handbook for Regulated Cryptoasset Activities
November 2025 - Consultation
Innovate Finance has submitted responses to the FCA consultation on applying handbook rules and the Consumer Duty to regulated cryptoassets, drawing on the experience and expertise of members across our Digital Pound Foundation programme and the support of law firm Travers Smith.
Chapters 1-5
Our response to Chapters 1-5 considers the application of high-level standards and supervision to regulated crypto assets across areas such as governance, operational resilience, and ESG.
As a general principle we understand and support the approach taken by the FCA to apply existing non-sector-based rules to cryptoassets. The drafting of the rules has clearly been approached in line with this objective, with particular details or exemptions acknowledging the specificities of the cryptoasset sector and its underlying business models. For existing FCA-regulated firms we note this will be an incremental rather than a fundamental change. For crypto-native firms the sector-specific guidance is welcome given for some it is the start of their regulated journey.
Operational resilience is a key area where our member firms would like further clarification, for example a greater level of detail demonstrating the expected best practice across sound operational risk management practices, and updates to the guidance on matters such as how far into the ecosystem companies need to go in terms of their risk mapping.
The FCA is currently reviewing the Senior Managers and Certification Regime with proposals to streamline application and introduce a more proportionate framework. Whilst underway, we believe existing SMCR requirements should not be applied to cryptoasset firms; it will be inappropriate to require compliance costs and processes associated with a burdensome set of requirements that are then reformed soon afterwards. Application to cryptoasset firms should be at the point new streamlined rules are introduced. At this point it will also be necessary to consider where and how the regime applies to components of the value chain for stablecoins given SMCR is not currently extended to payments and e-money firms. The FCA should make clear that payments services utilising stablecoins are out of scope of SMCR.
Chapters 6-7
Our response to Chapters 6-7 considers the application of Consumer Duty rules and the Financial Ombudsmen Scheme to regulated cryptoassets.
As an overarching principle, our members have consistently supported the intention of the Consumer Duty in ensuring clear expectations and good outcomes for consumers. We support application of the Consumer Duty to regulated cryptoassets, supplemented by principles-based guidance or case studies and examples of best practice where this is necessary or useful to demonstrate expectations or exemptions across the stablecoin value chain given this is a newly regulated activity. Additional guidance must not create additional prescriptive rules. This would also give greater scope for the FCA to flex and iterate the framework as the market develops.
In line with FCA correspondence to the Chancellor that application of the Consumer Duty should be proportionate to the client’s sophistication and risk appetite, the Consumer Duty should not apply to wholesale cryptoassets and large commercial transactions. We would expect those holding cryptoassets in self-hosted (non-custodial) wallets to also be out of scope given transactions are self-initiated and less reliant on third-party suppliers.
Our members are broadly supportive of application of the DISP sourcebook and access to the Financial Ombudsman Service, although we note that the requirements and processes of the FOS are currently under consideration any may be modernised or amended in the coming months.
Finally, we agree that UK-issued regulated stablecoins should not be classified as Restricted Mass Market Investments. Stablecoins present much lower volatility risk and their purpose is stability. We echo the FCA’s ambition of the future use case of stablecoins in retail payments, where RMMI classification would bring friction and obstacles to payment use cases. This would also align with international examples for competitiveness purposes, where fiat-backed stablecoins have been treated more as units of payment or digital money, from both a regulatory and financial promotions perspective.
Read the full response here:
