UK FCA Seeks Feedback from Crypto Industry, Plans to Advance Investment Rule Reform and Strengthen Risk Control

The UK Financial Conduct Authority (FCA) has released discussion and consultation papers proposing multiple reforms aimed at 'enhancing the UK investment culture' and officially seeking feedback from the crypto industry. FCA aims to adjust customer classification and rules related to conflicts of interest while 'expanding consumer investment channels.' FCA highlights poor investment performance on high digital engagement (DEP) applications, mostly stemming from crypto assets and contract for difference (CFD) trading. The regulator emphasizes the significant risks of some users investing through 'crypto asset proxy products' without limits, risk warnings, or suitability tests. In the consultation paper, FCA suggests new guidelines: Customers with a history of mainly investing in high-risk speculative assets or crypto assets should not be considered as having 'professional investment capabilities' unless they have sufficient evidence to meet the threshold for professional investors, including the ability to bear potential losses. FCA states that this reform aims to simplify the regulatory framework, with institutions taking on clearer review responsibilities rather than relying on past 'more casual tests.' Regulatory bodies require companies involved in crypto asset advice or sales to submit feedback by February and March next year. In recent years, the UK has been gradually modernizing crypto regulation, including officially recognizing digital assets as 'property' in 2024 to provide clearer legal basis for theft, bankruptcy, and other cases. At the same time, the government is also evaluating whether to ban crypto asset donations to political parties.

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