The policy statement covers the application of key sets of rules including COBS, DISP, SYSC, SUP and CASS sourcebooks in the FCA handbook as well as ESG and consumer duty requirements. Most cryptoasset firms will be brought within the FCA’s core conduct and firm standards architecture, with requirements applying on the basis that “designated investment business” is extended to qualifying cryptoasset activities.

Key areas for awareness

COBS will generally apply to cryptoasset firms, but:

• certain requirements will be disapplied, including where bespoke requirements sit in the CRYPTO sourcebook;
• COBS 5, 11, 15 and 16 are examples of chapters subject to targeted disapplication);
• COBS 10 on appropriateness has been updated, including strengthening annex 4G and a bespoke appropriateness test for lending and borrowing (readers should be aware that changes in relation to appropriateness will be the subject of further consultation); and
• the definition of restricted mass market investments used in the COBS 4 rules on financial promotions excludes a qualifying stablecoin product (which is a new defined term in the FCA glossary) that includes a UK qualifying stablecoin, reflecting their lower risk profile.

Most of SYSC will be relevant to cryptoasset firms, but:

• permissionless DLTs are not going to be treated as outsourcing under SYSC 8;
• there will be a further DLT-specific guidance later in the year; and
• on operational resilience, SYSC 15A applies to authorised cryptoasset firms and the FCA has published finalised guidance FG26/6.

The consumer duty will generally apply to cryptoasset firms, but:

• there are certain exemptions for admission and trading activities (in particular, the consumer duty will be disapplied by virtue of an amended “retail market business” definition, although communications that are not QCDDs or SDDs will remain subject to the consumer duty);
• the FCA has published finalised guidance FG26/5 on how the duty applies to crypto firms; and
• firms should also review the recent consultation paper CP26/23 on proposal relating to the consumer duty’s scope.

SMCR applies to cryptoasset firms, but:

• a certification regime “modification by consent” will operate pending the conclusion of the SMCR review (as consulted on in CP25/25);
• individuals involved in the “backing asset management” element of stablecoin issuance activity will not be required to certify under the “proprietary trader” certification function; and
• the FCA has amended the enhanced firm threshold for stablecoin issuers (reduced from £65bn to £20bn in backing assets).

In terms of other topics:

• DISP and FOS are extended to apply to cryptoasset firms, subject to territorial limits for branch-authorised QCATPs;
• the FCA has confirmed that safeguarding cryptoassets (including specified investment cryptoassets) will not be in scope of FSCS protection, even though nearly half of respondents did not support this approach – which will mean that tokens and their non-tokenised equivalents will be treated separately for the purpose of this activity;
• international firms should review the FCA’s finalised guidance on its approach to international cryptoasset firms in FG26/7;
• financial crime requirements will be applicable as set out in SYSC 6, the Financial Crime Guide and Thematic Reviews (in addition to other requirements under AML and financial crime legislation);
• new SUP 16.35 introduces a regulatory reporting regime (for branch-authorised firms, this is scoped to UK activity); and
• other consequential changes are made for alignment and consistency purposes.