The United Kingdom’s Financial Conduct Authority (FCA) has officially entered the final stage of consultations for a sweeping new regulatory framework designed to bring digital assets under the same rigorous standards as traditional financial markets. This move represents the “final step” in the government’s ambitious roadmap to establish the UK as a global hub for regulated cryptoasset activity while prioritizing consumer protection and market integrity.
The latest consultation package introduces ten proposed rules aimed at fostering a more transparent and competitive market. Key areas of focus include new standards for business conduct, restrictions on the use of credit to purchase cryptoassets, and stricter requirements for asset safeguarding. The regulator also aims to clarify how retail collateral should be treated in crypto borrowing arrangements. While the FCA noted that these rules are designed to build public trust, it issued a firm reminder to investors that regulation cannot eliminate the inherent volatility and risk associated with the crypto market.
A critical milestone in this roadmap is the introduction of a formal licensing regime. The FCA has indicated that the application gateway for cryptoasset service providers is expected to open in September 2026. Under this new system, firms will be required to obtain full authorization under the Financial Services and Markets Act (FSMA) to operate legally within the UK. This regime will replace the current limited registration system, imposing tighter oversight on governance, operational resilience, and anti-money laundering controls. Stakeholders and industry participants have until March 12 to provide feedback on these final proposals before the rules are codified.
Beyond market conduct, the UK government is also moving to tighten the intersection of digital assets and political activity. Ministers are currently weighing a ban on cryptocurrency donations to political parties, citing concerns over anonymity and potential foreign interference in the electoral process. The proposal, which may be included in the upcoming Elections Bill, follows a high-profile move by Nigel Farage’s Reform UK party to become the first major political organization in the country to accept digital asset contributions.
Simultaneously, the government is advancing a significant overhaul of the tax treatment for decentralized finance (DeFi). Under a newly backed framework, the government plans to implement “No Gain, No Loss” (NGNL) rules for liquidity provision and lending. This change would ensure that users do not trigger a capital gains tax event simply by depositing tokens into a protocol or smart contract, provided they maintain economic ownership. While capital gains would only be realized upon an actual economic disposal, staking rewards and yields will continue to be treated as miscellaneous income. This tax reform is seen as a major step in removing administrative barriers for UK-based DeFi users.
