On 16 December 2024, the Financial Conduct Authority (FCA) published its discussion paper DP24/4 on regulating cryptoassets, focusing on admissions and disclosures requirements and a market abuse regime for cryptoassets, accompanied by a press release outlining the regulator's approach.
This development builds upon the FCA's November 2024 publications, which included research findings showing increased cryptoasset adoption among UK consumers and the regulator's crypto roadmap.
Background and Scope
The discussion paper represents a significant step forward in the UK's cryptoasset regulatory framework, following HM Treasury's initial consultation and call for evidence in February 2023 and its subsequent response in October 2023. For the purposes of the discussion paper, the FCA's focus is on spot cryptoassets, such as stablecoins and unbacked cryptoassets like Bitcoin and Ether. The scope specifically excludes assets already captured under the existing list of specified investments in UK legislation, such as tokenised financial instruments and security tokens.
Admissions and Disclosures Regime
The FCA outlines HM Treasury's expected legislation for a new admissions and disclosures (A&D) regime. This regime will regulate public offers of cryptoassets, which will be prohibited unless specific exemptions apply. Such exemptions include offers made via admission to trading on a cryptoasset trading platform (CATP) or offers available exclusively to qualified investors, such as institutional investors.
The regime will also govern the admission of cryptoassets to trading on CATPs, the communication of advertisements relating to public offers or admissions, and the disclosure of information relating to public offers. The proposed disclosure requirements are comprehensive, encompassing information about governance mechanisms, legal status, operational and cyber resilience, technological risks, key features and characteristics, track record, and sustainability-related disclosures.
Particularly significant is the discussion around the role of CATPs in establishing and implementing disclosure requirements. The FCA is considering whether CATPs should assume responsibility for setting detailed requirements for admission documents and their review. There is also consideration of whether CATPs should maintain consistency in admissions or whether an industry-led standardisation of disclosures would better serve consumer interests.
Market Abuse Framework
The discussion paper introduces a framework for preventing, detecting, and disrupting cryptoasset market abuse (MARC), which is expected to mirror the existing UK market abuse regime closely. The government plans to introduce legislation prohibiting insider dealing and market manipulation in relation to cryptoassets traded on regulated CATPs, while requiring the disclosure of inside information.
The framework addresses several key areas, including inside information disclosure responsibilities and the challenges posed by the potential lack of identifiable issuers. It also considers the specification of regulated information for ongoing disclosure, methods for disseminating inside information, and safe harbours for legitimate behaviour.
The FCA also explores market abuse systems and controls for CATPs and cryptoasset intermediaries, including requirements for insider lists, managers' transactions, and on-chain monitoring. The discussion extends to options for cross-platform information sharing across CATPs, acknowledging concerns raised by market participants during policy roundtables.
Next Steps
The FCA is seeking industry feedback on these proposals until 14 March 2025.Following the consultation period, the regulator will analyse the responses received and conduct further industry engagement to determine next steps. This will be followed by consultations on specific proposed rules.
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