We responded to the Financial Conduct Authority’s (FCA) consultation paper CP25/25 ’Application of FCA Handbook for Regulated Cryptoasset Activities’ through the International Regulatory Strategy Group (IRSG). The IRSG is a joint venture between TheCityUK and the City of London Corporation. Its remit is to provide a cross-sectoral voice to shape the development of a globally coherent regulatory framework that will facilitate open and competitive cross-border financial services.
Overall, we support the FCA’s efforts to apply appropriate Handbook provisions to cryptoasset firms, aiming to establish a proportionate, risk-based, and consistent regime.
Key messages:
- Designated investment business classification: We support classifying qualifying cryptoasset activities as ‘designated investment business’ under the Handbook. Stablecoins should be treated proportionately as payment instruments. The FCA should clarify overlaps with payments rules, consider carve-outs for payment-focused stablecoins, and issue joint guidance with the Bank of England. Further clarity is needed on the scope of activities.
- High-level standards: We agree with applying the FCA’s high-level standards and 11 Principles to cryptoasset firms. The phased approach is proportionate and ensures regulatory consistency with traditional finance.
- SUP rules: We support applying SUP (excluding SUP 16) to cryptoasset firms, ensuring consistent supervision, oversight, and market integrity.
- Senior Management Arrangements, System and Control (SYSC) rules: We support extending SYSC requirements to strengthen governance, risk management, and accountability. Further guidance on conflicts of interest and alignment with Senior Managers and Certification Regime (SM&CR) and the Training and Competence sourcebook (TC) standards is welcomed.
- SM&CR: We support applying SM&CR to cryptoasset firms to enhance accountability and align standards with other regulated sectors.
- Cyber and digital resilience: We highlight the growing relevance of quantum threats (‘Harvest Now, Decrypt Later’) and recommend early adoption of post-quantum cryptography (PQC). Zero-knowledge proofs (ZKPs) also show potential for improving privacy and compliance in digital finance.
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