The U.K. Financial Conduct Authority’s (FCA) new crypto framework has drawn praise for its focus on maintaining global liquidity and encouraging institutional participation, though the approval process is expected to be complex and demanding.
Unveiled this week, the FCA’s regulatory package has been welcomed for its globally connected approach. Still, industry participants say critical uncertainties remain, raising questions about whether the U.K. can truly establish itself as a leading international crypto hub.
Market observers note that the framework is designed to preserve access to global liquidity by allowing firms to operate through offshore trading venues, while also permitting the use of stablecoins issued outside the U.K.
Katie Harries, Coinbase’s head of policy for Europe, described the release as a major step forward, highlighting it as a milestone that enhances regulatory clarity and strengthens the U.K.’s position in the digital asset space.
The FCA’s openness to global liquidity and foreign-issued stablecoins contrasts with the European Union’s Markets in Crypto-Assets (MiCA) regime, which many see as more restrictive, effectively pushing firms to segregate European operations and liquidity pools.
A key element of the FCA’s framework is the proposed Qualifying Cryptoasset Trading Platform (QCATP) model. According to Christopher Collins, a partner at Katten Muchin Rosenman, this model would allow overseas exchanges to serve U.K. customers via locally authorized branches that remain connected to global trading infrastructure.
Collins noted that this structure would enable U.K. users to benefit from deeper, established global liquidity rather than relying on isolated domestic markets, potentially resulting in more competitive pricing and better execution.
However, he cautioned that a major issue remains unresolved. While the FCA has indicated that overseas firms will only be approved if their home jurisdictions offer “equivalent regulatory protection,” it has yet to clarify which jurisdictions qualify.
This lack of detail, Collins argued, creates uncertainty for firms attempting to plan their business strategies, making it difficult to commit resources to the U.K. market.
Harries also pointed to decentralized finance (DeFi) as an area of concern, warning that earlier proposals could restrict centralized platforms from providing access to DeFi services.
She emphasized that the U.K.’s approach to DeFi will be pivotal, noting that overly restrictive rules could leave it lagging behind jurisdictions like the United States, where regulators are actively exploring DeFi as part of broader tokenization efforts.
Beyond policy considerations, the authorization process itself presents a significant hurdle. Thomas Cattee, a partner at Gherson Solicitors, warned that firms applying under the new Financial Services and Markets Act framework face a high probability of rejection.
He highlighted that even the current anti-money laundering (AML) registration process—far narrower in scope—has already proven extremely rigorous, with more than 85% of applications either rejected or withdrawn. The new regime expands requirements considerably, covering areas such as consumer protection, capital standards, operational resilience, and executive accountability.
Cattee also urged firms not to delay their applications, pointing to the rollout of MiCA in Europe, where late submissions created bottlenecks and left some firms unable to secure licenses in time.
For institutional investors, the framework represents more than just another regulatory update. Sandy Jones, director of digital assets at Baillie Gifford, said that while regulation does not inherently reduce risk, it provides the legal certainty and governance standards needed for traditional financial institutions to adopt blockchain-based systems.
He added that although the technology is powerful, it cannot on its own drive integration into mainstream finance without clear legal frameworks, operational stability, and trusted governance structures.
Jones also welcomed the FCA’s updates to its stablecoin rules, saying they help build reliable settlement infrastructure without introducing unnecessary complexity.
Overall, industry reaction suggests the FCA is positioning the U.K. as a pragmatic and business-friendly alternative to the EU’s MiCA framework. However, whether that strategy succeeds will depend less on the ambition of the rules and more on how consistently and transparently they are implemented in practice.
The central challenge will be ensuring that regulatory uncertainty and a demanding approval process do not erode the competitive advantages the framework is intended to create.
