UK Crypto Rules Draw Positive Industry Response, but Licensing Hurdles Remain

The UK Financial Conduct Authority has unveiled a new crypto-asset regulatory framework, prompting a range of industry reactions. Market participants welcomed provisions designed to preserve access to global liquidity, while highlighting steep licensing requirements as a key hurdle.

CoinDesk reported on July 4 that the FCA formally released its crypto regulatory package. The framework introduces a Qualified Cryptoasset Trading Platform, or QCATP, model that would allow overseas exchanges to serve UK clients through locally authorized entities. It also permits the circulation of stablecoins issued outside the UK and pegged to fiat currencies.

Industry participants say the rules take a more open approach than the European Union's Markets in Crypto-Assets regulation, or MiCA, because they allow access to overseas exchanges and global liquidity. Katie Harries, Coinbase's head of European policy, called the FCA's publication of its final crypto rules an important milestone for improving regulatory clarity and strengthening the UK's competitiveness in digital-asset innovation.

Christopher Collins, a financial markets and regulatory partner at Katten Muchin Rosenman, said the QCATP model would allow UK investors to use existing global trading infrastructure without going through a separate domestic liquidity pool. That could deliver better pricing and trading conditions.

Still, the framework leaves some issues unresolved. Harries said the initial proposal could make it effectively difficult for centralized trading platforms to provide access to decentralized finance services. That could leave the UK out of step with major jurisdictions including the US, where DeFi is being considered as part of tokenization strategies.

Collins said the FCA has not yet specified which overseas jurisdictions would qualify as providing a "comparable level of regulatory protection." Without that, firms lack clarity to design their UK business models.

The toughest challenge may be the licensing process. Thomas Cattee, a partner at Gerson Solicitors, said more than 85% of applications under the existing anti-money laundering registration regime were either rejected or withdrawn. The new framework introduces much broader requirements, including consumer protection, prudential standards, operational resilience and senior manager accountability, sharply increasing the risk that applicants fail to win authorization.

He also pointed to bottlenecks in Europe when many companies delayed filings until just before MiCA took effect, and said firms in the UK should begin preparing for licensing early.