UK watchdog extends consumer duty to crypto

TLDR

The UK Financial Conduct Authority is moving to apply its Consumer Duty regime to crypto firms that serve retail customers in or from the UK.

1. The FCAs Consultation Paper 26/4 would extend rules on fairness, transparency, and fair value to many retail crypto services.
2. Users gain stronger protections such as standardised complaints handling and access to the Financial Ombudsman, but crypto still will not be covered by FSCS compensation.
3. Most overseas platforms targeting UK users will need a UK entity, and the consultation outcome will shape which products remain viable and how strict conduct rules become.

Deep Dive

1. What The FCA Is Proposing

The FCAs Consultation Paper 26/4 sets out how its existing Consumer Duty will apply to cryptoasset activities in the UK, aligning crypto conduct rules with traditional finance. A summary of the paper explains that the Duty, which requires firms to act in good faith, avoid foreseeable harm, and provide fair value, would now cover retail facing crypto services such as custody and dealing for consumers, while some wholesale activities remain out of scope. The FCA also plans to apply parts of its Conduct of Business Sourcebook and create a dedicated Crypto Handbook to codify expectations for crypto firms operating in or targeting the UK market.

2. What Changes For UK Crypto Users

Under the proposals, crypto firms would need to follow FCA style consumer protection and safeguarding rules, including handling complaints under standard FCA processes and giving customers access to the Financial Ombudsman Service for disputes, as outlined in the new rules summary. However, the Financial Services Compensation Scheme would still not cover crypto, so users would not be automatically compensated if a crypto firm fails. The FCA also proposes client money style safeguarding (CASS 17) for firms holding customer funds, which should tighten how platforms segregate and protect user assets.

3. Impact On Firms And What To Watch

The consultation suggests that most overseas crypto firms actively targeting UK consumers will need a UK legal entity to comply, which could push some smaller or higher risk platforms to exit the market. Senior managers at firms dealing with stablecoins and large crypto holdings would face closer scrutiny, raising governance and compliance costs that may be passed on through higher fees or narrower product menus. The key next steps are the consultation feedback, final FCA rules, and any transitional timetable, which will determine how quickly platforms must adapt or restructure their UK offerings.

Conclusion

The FCAs plan to extend Consumer Duty to crypto tightens conduct and safeguarding rules around UK retail crypto activity, bringing it closer to mainstream finance. For users, that likely means more robust protections and clearer complaint routes, but still no safety net if a platform collapses and potentially fewer, more tightly regulated venues to choose from.