UK Crypto Firms Face Strict Regulatory Regime Starting 2026, FCA Says

UK crypto businesses have approximately one year to prepare for a significantly stricter regulatory framework, according to a senior Financial Conduct Authority (FCA) official. The upcoming “gateway regime,” originally anticipated for 2026, will establish a comprehensive authorization system requiring crypto companies to undergo a fresh approval process, regardless of existing registrations.

Matthew Long, director of payments and digital assets at the FCA, revealed in an interview with CoinDesk that the new framework will represent a substantial regulatory expansion.

“We will have a gateway which will allow authorization. But obviously we’ve got to go through those consultations, create those rules and get the legislation for that to take place,” Long explained.

This regulatory evolution marks a significant departure from the current anti-money laundering (AML) requirements. Major exchanges like Coinbase, Gemini, and BitPanda will transition from simple registration to comply with anti-money laundering rules to facing a comprehensive authorization process covering multiple crypto activities.

The FCA plans to issue guidance papers throughout 2024 addressing stablecoins, trading platforms, staking, prudential crypto exposure, and other areas. Following publication of final policy papers, the new regime is expected to become operational in 2026.

Historical data shows the FCA’s stringent approach to crypto regulation. Since opening its anti-money laundering register in 2020, the authority has received 368 applications but approved just 50 firms—representing a mere 14% success rate. Under the new framework, many existing registrants may need to restart the application process.

## Regulated Activities

Upcoming legislation will clearly define which crypto activities fall under regulatory oversight. Companies engaged in these activities will require formal authorization from the FCA.

In 2023, the previous UK government published documents indicating that regulated activities would likely include crypto and fiat-referenced stablecoin issuance, as well as payment, exchange, and lending activities.

Stablecoins will now follow a different regulatory path than originally planned. Former Economic Secretary Tulip Siddiq announced in November that stablecoins would no longer fall under existing UK payment regulations. The FCA intends to release draft rules for stablecoins early this year.

“What we’re doing in terms of the stablecoins is we’re making sure that we take the best from the current regulation that exists in TradFi, but stablecoins are ultimately unique,” Long noted. “There isn’t anything that is exactly the same. We’ve got to adapt the regulation that we’ve currently got.”

## Transition Process

The FCA is still developing the precise authorization process that crypto companies will need to navigate. Long indicated that firms already registered under the money laundering regime will likely need to apply for expanded permissions if they want to engage in newly regulated activities.

“We’ll be communicating with firms about what the gateway will look like before it goes live, our intention is to bring it live as soon as humanly possible,” Long stated regarding the authorization framework.

In crafting its approach, the FCA plans to examine regulatory models from other jurisdictions, particularly the European Union’s bespoke crypto legislation and the International Organization of Securities Commissions’ (IOSCO) 18 recommendations. According to sources familiar with the matter, IOSCO will soon publish an assessment of how various countries are implementing its standards.

“It’s a case of understanding and looking for best practice,” Long concluded.

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