UK FCA Demands Crypto Firms Update Permits Under New FSMA Authorization Regime
London's financial watchdog just dropped a new rulebook—and crypto companies are scrambling to comply.
The Regulatory Reboot
The Financial Conduct Authority is forcing digital asset firms to refresh their operating licenses. It's part of a broader shift under the updated Financial Services and Markets Act—legislation that's finally catching up to the crypto revolution. Think of it as a regulatory system update, but one that could brick non-compliant businesses.
Permission Slip Renewal
Existing 'cryptoasset registrations' won't cut it anymore. Firms need full FSMA authorization—a heavier lift with stricter capital, governance, and reporting demands. The FCA isn't just checking boxes; it's building a fortress. Expect deeper scrutiny on anti-money laundering protocols, consumer protection measures, and operational resilience. For some, it's a paperwork nightmare. For others, it's a ticket to legitimacy.
The Compliance Clock is Ticking
No grace period. The FCA set a hard deadline, creating a mad dash for legal teams and compliance officers. Firms that miss the cut-off face a brutal choice: cease UK operations or become regulatory fugitives. It's creating a two-tier market—the well-capitalized players who can afford the compliance overhead, and the rest.
Legitimacy Has a Price Tag
This move signals the UK's attempt to shed its 'Wild West' reputation. By forcing crypto into the traditional regulatory fold, the FCA aims to protect consumers and prevent another FTX-style collapse. The subtext? If you want to play with the big banks, you need to wear their suit—and pay their lawyers. It's the financial equivalent of 'if you can't beat 'em, make 'em fill out Form 487-B in triplicate.'
The new regime could finally give institutional investors the confidence to dive in—or it could strangle innovation with red tape. Either way, the days of operating in the regulatory shadows are over. The FCA just made it clear: in the UK, crypto grows up or gets out.
FCA mandates crypto firms update permits before the regime
The Financial Conduct Authority revealed that businesses that it has already authorized under the FSMA to engage in additional regulated activities must modify their current permits before the new regime takes effect.
The UK markets regulator emphasized that crypto firms that now use the services of another FCA-authorized firm, known as an s.21 approver, to approve their final advertising will no longer be able to do so. The regulator instructed that these crypto companies will need new authorization.
The FCA has instructed that firms will be required to request a pre-application meeting with the Financial Regulator’s Pre-Application Support Service (PASS).
The UK regulator has declared that the application period will last at least 28 days and must end at least 28 days prior to the new regime taking effect. FCA announced it expects the application period to open in September 2026.
Through a Treasury’s draft Statutory Instrument, the FCA will provide a facility for savings during the application period, enabling the company to continue offering cryptoasset services until its application is ultimately decided.
Cryptoasset companies will need to notify the FCA that they are utilizing the saving provision during the application period. Crypto firms will also be required to inform the FCA when they decide to stop using the saving provision as soon as it is reasonably possible following the full commencement date.
The FCA cautioned that cryptocurrency companies may not obtain the necessary approvals in time if they apply after the application period but before the full regime starts. Crypto firms will automatically enter the transitional provision while their applications are being evaluated, in certain situations, when the new regime comes into effect.
FCA tests industry-led crypto disclosure standards through sandbox
On November 26 last year, the FCA accepted the RegTech platform Eunice into its Regulatory Sandbox to investigate an industry-led solution aimed at increasing the transparency of the UK’s cryptocurrency markets.
Eunice assists companies, regulators, and financial institutions in navigating tokenized assets, cryptoassets, and on-chain infrastructure. FCA reported that Eunice will develop and test a novel solution in The Sandbox to reveal crucial information about cryptoassets in collaboration with some of the largest cryptoasset companies, including Coinbase, Crypto.com, and Kraken.
The UK financial regulator claimed that introducing Eunice will help make digital assets safer and more secure for UK investors by ensuring that buyers are aware of the risks before making a cryptocurrency purchase.
“A working group convened and led by Eunice has developed standardised, industry-led crypto disclosure templates that will make it easier for firms to meet document requirements, to ensure investors have the right information to make well-informed decisions.”
–Yi Luo, CEO and co-founder of Eunice.
Luo said that Eunice will test the disclosure templates to maximize openness as part of the FCA’s Regulatory Sandbox. The FCA’s approach to the disclosure rules for cryptoassets will be influenced by the lessons learned from Eunice’s test.
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