The United Kingdom’s financial regulator has scaled back its capital and disclosure requirements for crypto companies, responding to industry concerns that initial proposals were excessively burdensome and could impede the country’s position in the rapidly evolving digital asset market. The Financial Conduct Authority (FCA) unveiled revised rules that will govern the UK’s crypto sector starting in October 2027.

The FCA reduced the capital requirements applicable to stablecoin issuers and crypto trading firms, tailoring the rules to the particular risks posed by these entities. Smaller companies and those engaged in lower-risk activities will no longer be subject to a blanket obligation to publicly disclose their capital requirements, a notable shift from the regulator’s original approach. The FCA anticipates that the updated framework will boost consumer confidence and attract an additional three to four million customers to the UK’s cryptocurrency market.

David Geale, executive director for payments and digital finance at the FCA, emphasized the significance of the new regime, describing it as the most substantial expansion of the FCA’s remit in a decade. He cautioned that while the rules provide a foundation for growth, crypto investments remain inherently risky and consumers should be aware of the potential for loss. “There’s no reason why people shouldn’t have a proportion of their portfolio in high-risk assets,” Geale said, underscoring the need for investor awareness.

Industry representatives welcomed the adjustments. Renuka Rawlins, director of policy and government relations at the Payments Association, described the revisions as “encouraging” and commended the FCA for responding to feedback by replacing “rigid complexity with commercial workability.”

The UK’s regulatory stance has long faced critique from sector executives, who viewed the approach as overly cautious compared to jurisdictions like the United States and the European Union. Under former US President Donald Trump, for example, regulators adopted a comparatively light-touch model, particularly regarding stablecoins. The EU’s Markets in Crypto Assets Regulation came into effect at the end of 2024, offering another point of reference for UK authorities.

The FCA’s latest adjustments include halving the extra capital stablecoin issuers must hold for non-systemic stablecoins, from 2% to 1% of total issuance. Similarly, capital requirements for companies holding crypto tokens in their trading books have been moderated to cover 40% of net exposure, down from a previous proposal that riskier tokens might require 100% capital coverage.

The regulator also eased several other rules concerning liquidity, intragroup custody arrangements, and pre-trade transparency. It plans to issue guidance on decentralized finance (DeFi), a typically unregulated segment of the crypto market that uses automated contracts to replace traditional intermediaries and often lacks a central controlling entity. DeFi has drawn scrutiny following hacks leading to losses exceeding $500 million this year.

Matthew Long, the FCA’s director of payments and digital assets, noted that regulatory requirements will apply when an identifiable controlling entity exists within DeFi structures, highlighting the blurred lines between decentralized and centralized finance.

Since 2018, crypto firms in the UK have been obligated to register with the FCA for anti-money laundering and counter-terrorism financing compliance. Under the new regime, many of the 62 registered firms are expected to apply for full licenses.

Applications under the updated rules will open on September 30, with full implementation scheduled for October 25, 2027.