The United Kingdom’s Financial Conduct Authority, the watchdog overseeing the country’s financial sector, has released new proposals aimed at strengthening the nation’s investment culture and expanding access to regulated financial products. In documents published on Monday, the FCA requested detailed feedback from crypto companies as it evaluates changes to rules on client categorisation, conflicts of interest and the growing role of high risk digital assets.
The FCA said that consumer engagement on high activity investing apps showed significant underperformance, noting that a large portion of losses could be traced to trading in cryptoassets and contracts for difference. The watchdog highlighted that many users were accessing crypto related exposure without proper investment limits, warnings or suitability assessments.
FCA proposes stricter guidance for crypto investors
In its consultation paper, the FCA proposed updated guidance stating that a personal investment history built mainly on speculative products or cryptoassets should not be treated as evidence of professional capability. The regulator said that only when investors meet additional criteria, including the proven ability to bear potential losses, should firms consider categorising them as professional clients.
The FCA argued that the changes would streamline existing guidelines and reduce arbitrary tests that often created confusion. Instead, the watchdog wants firms to take greater responsibility for ensuring that clients understand the risks associated with high volatility products, especially cryptoassets.
Companies that provide advice on or sell digital assets have been asked to submit responses by February and March. The regulator will use industry feedback to determine whether reforms are necessary to improve investor protection without limiting access to new asset classes.
UK continues gradual progress on digital asset regulation
The FCA’s move forms part of a broader effort by the UK government to modernise its regulatory approach to digital assets. The country has positioned itself as a hub for crypto businesses operating outside the United States, especially during periods when industry leaders viewed US regulatory enforcement as uncertain or restrictive.
In December, the UK government passed a major law recognising cryptocurrencies as property. The legislation provides clearer definitions and legal processes for issues such as recovering stolen digital assets or handling insolvency related claims. This has been widely viewed as a significant step toward establishing a stable framework for digital asset ownership.
The government has also considered a potential ban on political donations made in crypto, citing concerns about transparency and oversight. Despite these discussions, the UK continues to adopt a measured approach that balances innovation with investor protection.
Conclusion
The FCA’s request for input reflects the growing complexity of the digital asset market and the need for updated policies. For the watchdog, ensuring safer access to investments while reducing personal financial risks remains a priority. As crypto adoption increases in the UK, industry feedback will play an important role in shaping future regulations and determining how digital assets fit within the broader financial system.
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