Executive Summary
- What’s new: HM Treasury presented a detailed proposal for the regulation of cryptoassets for Parliament’s approval, and the FCA launched three consultations on proposed rules governing three critical areas: cryptoasset activities; admissions, disclosures and market abuse; and a prudential structure for cryptoasset firms.
- Why it matters: The proposals set out more detail of the evolving legal framework for cryptoassets in the UK, providing more certainty for those who operate in this sphere.
- What to do next: Firms should consider submitting comments as part of the consultation process, and monitor the outcome of the consultations.
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The UK’s cryptoasset regulatory framework continues to take shape following a series of coordinated legislative and regulatory developments across HM Treasury and the Financial Conduct Authority (FCA). Most notably, HM Treasury has now laid before Parliament the statutory instrument that will bring a wide range of cryptoasset activities within the Financial Services Market Act 2000 (FSMA) perimeter. This lays the legislative foundations for authorisation, conduct, disclosure and market integrity requirements.
In parallel, the FCA has published three new consultation papers setting out its proposed approach to regulating cryptoasset firms, including conduct and organisational requirements, non-stablecoin prudential standards, and a bespoke admissions, disclosures and market abuse regime for qualifying cryptoassets.
Taken together, these developments represent a significant step towards implementation of the UK’s comprehensive cryptoasset regime. This is scheduled to take effect in October 2027, and provide important insight into how the statutory framework will be operationalised. This client note provides a brief overview of these developments.
Final HM Treasury Cryptoasset Regulations Published
Overview and Context
On 15 December 2025, HM Treasury published the final draft Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025 (Regulations), together with an accompanying draft explanatory memorandum. The Regulations will implement key elements of the government’s approach to bringing cryptoasset activities within the UK regulatory perimeter, building on the near-final draft legislation published in April 2025. See our 30 April 2025 client alert “HM Treasury Publishes Draft Legislation Establishing Financial Services Regulatory Regime for Cryptoassets in the UK.” They represent a major milestone in the development of a statutory cryptoasset regime under FSMA.
At a high level, the Regulations establish the legislative framework through which cryptoasset activities will be regulated using existing FSMA concepts, rather than through a standalone crypto-specific regime. They also provide the statutory basis for extensive FCA rulemaking across conduct, disclosure, market integrity and prudential matters.
Key Elements of the Regime
In particular, the Regulations:
- Expand the regulated activities perimeter under FSMA to capture a broad range of cryptoasset activities, including operating a cryptoasset trading platform, dealing in cryptoassets as principal or agent, arranging cryptoasset transactions, safeguarding and administering cryptoassets, and certain cryptoasset lending, borrowing and staking-related activities. Detailed scope and application will be set out in FCA rules and guidance.
- Establish a Designated Activities Regime (DAR) for cryptoasset public offers and admissions to trading, and for cryptoasset market abuse. Under the DAR, firms may be subject to FCA rules and enforcement without necessarily requiring full FSMA authorisation.
- Introduce a statutory prohibition on public offers of qualifying cryptoassets in the UK unless an exemption applies. The Regulations create the legislative framework for detailed disclosure requirements, civil liability and criminal sanctions, with the FCA responsible for specifying the content and format of disclosures.
- Create a market abuse framework for cryptoassets, covering insider dealing, unlawful disclosure of inside information and market manipulation in relation to qualifying cryptoassets admitted to trading. This regime is intended to raise standards of market integrity in cryptoasset markets and will be supplemented by FCA rules.
- Align cryptoasset regulation with existing UK regulatory regimes, including the financial promotions regime and the UK anti-money laundering (AML) framework. In particular, the Regulations amend the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to reflect the shift from AML registration for cryptoasset exchange and custodian wallet providers to authorisation under FSMA for newly regulated cryptoasset activities.
- Include transitional and savings provisions designed to support an orderly transition into the new regime, including temporary permissions and exemptions for certain pre-existing contracts and activities, subject to conditions and FCA oversight.
Timing
The Regulations remain subject to approval from both Houses of Parliament, although this is expected to be a formality. The Regulations provide for full commencement on 25 October 2027, with certain provisions coming into force earlier to allow the FCA and Prudential Regulation Authority to make rules, issue guidance and undertake preparatory and supervisory work ahead of implementation, as well as allowing existing cryptoasset firms to obtain authorisation.
FCA CP25/40: Regulating Cryptoasset Activities
On 16 December 2025, the FCA published Consultation Paper CP25/40, setting out its proposed approach to regulating a wide range of cryptoasset activities under the new FSMA framework. The consultation focuses primarily on conduct, organisational and operational requirements, and is intended to operate alongside CP25/41 (admissions and market abuse) and CP25/42 (prudential requirements), both of which are discussed below.
CP25/40 includes proposals relating to:
- Cryptoasset trading platforms, including governance and senior management accountability, systems and controls, transparency, conflicts of interest, order handling and market surveillance arrangements.
- Intermediary activities, such as dealing in cryptoassets as agent or principal and arranging cryptoasset transactions, including conduct standards, client categorisation concepts adapted for crypto markets and safeguarding expectations.
- Cryptoasset lending, borrowing and staking, with a focus on consumer and market integrity risks associated with yield-generating products, custody chains, rehypothecation and liquidity management.
- Decentralised finance (DeFi), where the FCA reiterates that genuinely decentralised arrangements may fall outside the regulatory perimeter, but sets out factors it will consider when assessing whether activities are sufficiently decentralised in practice.
The FCA emphasises that its proposals aim to enhance consumer protection and market integrity while recognising the technological characteristics and risks of cryptoasset markets.
The FCA has requested feedback on the proposals by 12 February 2026.
FCA CP25/41: Admissions, Disclosures and Market Abuse for Cryptoassets
On the same date, the FCA published Consultation Paper CP25/41, which focuses on the detailed design of the Admissions and Disclosures regime and the Market Abuse Regime for Cryptoassets (MARC), both to be implemented through the DAR.
CP25/41 sets out proposals on:
- Admissions and disclosures, including admissibility criteria for qualifying cryptoassets, the content and format of admission documents, ongoing disclosure obligations, and the role of trading platforms and the FCA in reviewing and enforcing these requirements.
- Cryptoasset market abuse, including proposed definitions of insider dealing, unlawful disclosure of inside information and market manipulation adapted to cryptoasset markets, as well as the FCA’s proposed supervisory and enforcement approach.
The FCA’s stated objectives are to improve the quality and reliability of information available to investors, enhance market integrity, and support fair and orderly cryptoasset markets.
As with CP25/40, the FCA has requested feedback on the proposals by 12 February 2026.
FCA CP25/42: Prudential Regime for Cryptoasset Firms
Also on 16 December 2025, the FCA published Consultation Paper CP25/42, which sets out additional details on its proposed prudential regime for cryptoasset firms that will be authorised under FSMA, building on its proposals from its previous Consultation Paper CP25/15. See our 11 June 2025 client alert “UK FCA Publishes Consultation Paper on a Prudential Regime for Cryptoasset Firms.”
CP25/15 covered some aspects of the prudential regime for regulated cryptoasset firms, with a particular focus on stablecoin issuers and custodians of cryptoassets. CP 25/42 builds on those proposals and focuses on the remaining cryptoasset activities, namely operating a qualifying cryptoasset trading platform, staking, arranging deals, dealing as agent and dealing as principal in qualifying cryptoassets (which includes firms that offer lending and borrowing products). This represents a significant expansion of the FCA’s oversight of cryptoasset firms beyond its current focus on AML supervision and financial promotions.
The consultation proposes a proportionate prudential framework covering:
- Own funds and capital requirements, calibrated to the risks posed by different cryptoasset business models, including trading platforms, custodians, dealers and staking providers.
- Liquidity requirements and stress-testing expectations tailored to cryptoasset market dynamics.
- Governance, risk management and internal controls, including expectations around senior management responsibility and oversight.
- Wind-down planning and operational resilience, reflecting concerns about disorderly firm failure, custody risks and continuity of service.
The FCA explains that the proposals draw on existing FCA prudential sourcebooks where appropriate, while adapting them to the specific risks associated with cryptoasset activities.
As with the other consultation papers, the FCA has requested feedback on the proposals by 12 February 2026.
We will continue to monitor developments in relation to the implementation of the Regulations and the FCA’s consultation process, including the evolution of the proposed rules and guidance.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.