Response to FCA DP24/4: Cryptoassets Admissions Disclosures and MARC

Published 14 Mar 2025

The International Regulatory Strategy Group (IRSG) welcomes the opportunity to respond to the Financial Conduct Authority’s (FCA) discussion paper DP24/4 ‘Regulating cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets’ dated 16 December 2024. We wish to thank Clifford Chance LLP for their support in drafting this response.

Overall, we support the FCA’s steps to bring cryptoassets into the UK regulatory regime. A sound regulatory framework for cryptoassets is key to enable their potential to be realised sustainably, while proportionately managing the associated risks. However, the FCA should consider the points raised in this response to ensure a proportionate and effective regime.

In summary, we have noted the following key considerations for the future regime:

• Global harmonisation and competitiveness: The FCA must create a regulatory environment that acknowledges the decentralised nature of the cryptoasset market, where activities often span multiple jurisdictions. It is vital that the UK remains competitive on a global scale, avoiding the creation of idiosyncratic rules that could put UK-based market actors at a disadvantage compared to those operating under the European Union’s (EU) Markets in Crypto-Assets Regulation (MiCA) or other international frameworks. Harmonisation with such initiatives will prevent market fragmentation and reduce the potential for regulatory arbitrage, helping ensure a unified and streamlined regulatory environment that enables the UK to maintain its competitive edge in the international crypto market.
• Respect for existing industry and managing consumer duties: With the UK hosting a burgeoning crypto industry, it is imperative that any new regulatory regime considers the existing landscape, ensuring that current operations continue with minimal disruption. We support a balanced approach to consumer protection that allows investors to assume responsibility for their decisions, provided they receive appropriate risk warnings. An overly restrictive framework risks stifling market growth, potentially seeing the UK fall behind other jurisdictions. Thus, the proposed admission and disclosure (A&D) requirements should aim to support consumers effectively while simultaneously nurturing a fertile environment for innovation and competition.
• Challenges with admission documents and the importance of grandfathering: Significant challenges exist concerning the consistency of admission documents across Crypto Asset Trading Platforms (CATPs), primarily due to potential liability issues and the overarching demand for uniformity. We suggest that the FCA take a more direct role in approving admission documents, or consider creating an independent entity responsible for standardising and authorising these documents. By doing so, the regulatory framework would maintain transparency and consistency, and alleviate the burden on individual CATPs. Additionally, the concept of "grandfathering" existing cryptoassets – i.e. allowing existing CASPs to continue operating for a limited period while transitioning to full compliance with the new regulatory framework - is strongly advocated to ensure smooth and uninterrupted trading. This would allow investors and issuers the necessary space to transition under the new regulatory directives without incurring undue disruption or instability.
• Market abuse and the increasing threat of rug pulls: The FCA must address particular market abuses distinctive to the cryptoasset landscape, notably "rug pulls." These schemes involve project developers enticing investment into a newly created project, only to vanish, leaving investors with worthless assets. The annex stresses the importance of implementing robust measures focused on transparency and accountability to safeguard investors. This includes ensuring that controls are in place to prevent situations where an issuer could manipulate liquidity for personal gain, drawing parallels with traditional securities market abuses such as spoofing or wash trading. By tightening regulations and enhancing guidance concerning inside information, the FCA can help foster an environment that deters such harmful practices, thereby protecting consumers while supporting legitimate market activities.
• Principles for developing safe harbours and collaborative regulatory efforts: We broadly support the FCA’s proposed principles for crafting safe harbours and exceptions, especially concerning the delayed disclosure of inside information and parallels with share buyback programmes. These principles emphasise supporting market functionality and financial stability, reducing consumer harm, and clearly defining activities eligible for safe harbour protections. However, the FCA must engage closely with existing cryptoasset exchanges to better identify legitimate behaviours that might qualify for exemptions. Collaborative efforts between the regulator and industry stakeholders are crucial for designing a framework that accurately reflects operational realities while fostering trust and stability in the market.

Overall, the IRSG supports the FCA's efforts to create a thoughtful regulatory framework for cryptoassets, but cautions against measures that could inadvertently stifle innovation or competitive positioning. By focusing on global alignment, recognising the nuances of the cryptoasset landscape, and maintaining an open dialogue with the industry, the FCA can institute a proportionate regime that supports both robust market functionality and effective consumer protection. This balanced approach will help position the UK as a leader in the evolving global cryptoasset market, reinforcing its international competitiveness as a hub for innovation and financial excellence.