UK FCA Seeks Crypto Industry Feedback on Investment Rule Reforms and Risk Controls

Based on Odaily, the UK Financial Conduct Authority (FCA) has released discussion and consultation papers proposing reforms to 'enhance the UK investment culture' and is formally seeking feedback from the crypto industry. The FCA aims to expand consumer investment access while adjusting client classification and conflict-of-interest rules. It highlighted poor investment performance on high digital engagement platforms, largely attributed to crypto assets and CFD trading. The regulator warned of significant risks from users investing in 'crypto asset proxy products' without limits, risk warnings, or suitability tests. The FCA proposed new guidance stating that a history of investing in high-risk or speculative assets should not be considered evidence of 'professional investment capability' unless clients meet professional investor thresholds, including the ability to bear potential losses. The reforms aim to simplify the regulatory framework and place clearer due diligence responsibilities on institutions. Firms involved in crypto asset advice or sales are required to submit feedback by February and March 2026. The UK has been gradually modernizing crypto regulation, including recognizing digital assets as 'property' in 2024 to provide clearer legal grounds for theft and insolvency cases. The government is also evaluating a potential ban on crypto asset donations to political parties.