FCA Explores New Regulations for UK Crypto Exchange, Lending, and DeFi

The UK's Financial Conduct Authority (FCA) has initiated a series of consultations aimed at establishing proposed regulations for digital asset markets, representing a significant step forward in the government's efforts to create a thorough regulatory framework for cryptocurrencies.

Key Takeaways

The FCA has launched consultations on proposed regulations for crypto markets, focusing on exchanges, lending, and decentralized finance (DeFi).
The consultations, open until February 12, 2026, aim to balance innovation and consumer protection in crypto investments.
Proposed rules include clearer standards for exchanges and measures to combat insider trading and market manipulation.
DeFi activities will also be reviewed to determine if they should adhere to the same regulations as traditional financial services.
The UK government plans to extend financial laws to crypto assets by 2027, bringing them under FCA oversight.

FCA explores new regulations for UK crypto exchange, lending, and DeFi

FCA's Regulatory Consultation

The FCA's proposals are communicated through three separate consultation papers that encompass various aspects of cryptocurrency operations, including trading platforms, intermediaries, staking, lending, borrowing, market abuse, and disclosures. According to the FCA, these consultations will be open for feedback until February 12, 2026.

The regulator emphasizes the need for regulations that foster innovation while also ensuring that consumers comprehend the risks involved in crypto investments. They have stated that while completely eliminating risks is not feasible, regulations should promote responsible and transparent operations among market participants.

David Geale, the FCA’s Executive Director for Payments and Digital Finance, expressed, “Our goal is to create a regulatory framework that safeguards consumers, encourages innovation, and builds trust.” He highlighted that input from the industry will be vital in shaping the final regulations.

Moving Towards Comprehensive Market Structure

These consultations signify a pivotal advancement in the UK's comprehensive approach toward “market structure” regulations for cryptocurrencies. This development seeks to extend beyond earlier regulations that primarily targeted financial promotions and anti-money laundering compliance.

Under the new proposals, crypto exchanges would be subjected to more explicit standards concerning admissions, disclosures, and the integrity of trading activities. Furthermore, there would be enhanced measures to counter insider trading and market manipulation, aligning the cryptocurrency sector more closely with norms in traditional finance.

The consultation also places significant emphasis on crypto staking services. The FCA is reaching out for opinions on how firms should inform consumers about risks associated with products that generate returns by locking customer assets. Additionally, the proposals cover crypto lending and borrowing practices, which include safeguards designed to protect both borrowers and lenders.

Another critical aspect of the consultations is focused on decentralized finance (DeFi). The FCA is considering whether activities related to DeFi, such as trading, lending, and borrowing without intermediaries, ought to comply with the same regulatory standards as conventional financial services.

While these discussions are ongoing, Geale reminds consumers that, at present, these assets remain largely unregulated. He noted, “As we collaborate with partners to develop the UK’s crypto rules, it's crucial for users to remember that the crypto space is mainly unregulated, with the exception of financial promotions and financial crime regulations.”

Related: UK Crypto Lobbying Group Joins Digital Chamber in Cross-Border Policy Initiative

UK's Plans to Broaden Financial Laws to Include Crypto

The consultation was introduced shortly after the UK government revealed its intentions to enact legislation to incorporate crypto assets into the country’s financial sector laws by the year 2027.

On Monday, the UK Finance Ministry announced plans to establish regulations that would bring cryptocurrency firms under the jurisdiction of existing financial laws by October 2027. This move would effectively place crypto under the supervision of the FCA.

Chancellor of the UK, Rachel Reeves, called this regulatory inclusion a “crucial step” in maintaining the UK’s status as a leading financial center in the digital era.

Magazine: Meet the On-Chain Crypto Detectives Battling Crime More Effectively Than Law Enforcement