FCA proposes admission and disclosures regime for regulating cryptoassets

The discussion paper is the latest publication to follow from the FCA’s crypto regulation ‘roadmap’. The regulator is seeking feedback from interested parties – including participants in the wholesale cryptoasset market, cryptoasset firms and investors – on its proposals and questions by 15 March 2025.

Legislation to bring crypto assets into the FCA’s regulatory supervision, instead of establishing a new standalone regulatory regime, was first announced in 2023 by the previous government. Last month, the Labour government confirmed that it would proceed with the proposals. Under the government’s plans, the FCA’s regulatory powers for cryptoassets will expand to a more comprehensive conduct regime, covering cryptoasset trading, regulation of stablecoins, custody and other core activities.

According to the paper, the FCA proposes to introduce a new regime for cryptoassets admissions and disclosures (A&D) similar to the regime for the traditional securities market. The paper includes some key minimum disclosures required in admission documents. They include disclosure on features, prospects and risks of the cryptoassets, rights and obligations attached to the cryptoassets, and information about the underlying technology.

The FCA anticipates that there will be a ‘necessary information test’ in the proposed statute. This standard means that document preparers could be held liable for consumer losses if they did not include necessary information material to a consumer making an informed assessment of the cryptoasset.

The FCA is considering introducing more detailed requirements in the FCA Handbook, including requiring additional information to be disclosed on the nature and scope of governance mechanisms that may affect the cryptoasset. These requirements are designed to help firms provide sufficient detail to enable consumers to make an informed decision, while offering firms flexibility in determining the appropriate disclosures based on the specifics of the cryptoasset in question, the regulator said.

To ensure the information and statements relied on by consumers are accurate, the FCA proposes that the persons responsible for cryptoasset admission documents should be held accountable for their accuracy. The liability standard will be the ‘negligence’ standard, which is in line with the standards in the traditional securities market, as under the Financial Services and Markets Act 2000 (FSMA). This means that document preparers could face civil liability for untrue or misleading statements, or omissions of required information, if they are found to be negligent.

However, certain types of forward-looking statements will be protected by adopting the ‘recklessness’ standard under the FSMA, which imposes a lower liability risk. This is to encourage preparers of admission documents to include helpful and relevant decision-useful information.

“The FCA considers it is appropriate to introduce specific disclosure requirements for cryptoassets and a corresponding liability regime to support market participants in receiving consistent and adequate information about the products they are looking to invest in, and to ensure they can get compensation if the disclosures are inaccurate or misleading,” said financial regulation expert Ann Zheng of Pinsent Masons.

The A&D regime is set to place more responsibilities on cryptoasset trading platforms (CATPs). These platforms are expected to conduct a sufficient level of due diligence to assess whether a cryptoasset should be admitted to trading and that associated disclosures are accurate and complete. In some cases, CATPs could be liable for the accuracy of disclosures on the cryptoassets traded on their platforms.

Due diligence is also required under the financial promotions regime for cryptoassets intended for promotion. This process focuses on ensuring the promotion of any cryptoassets is fair, clear, and not misleading, and that the promoted cryptoasset is not linked to fraudulent activity, scams, money laundering or other financial crime. Financial promotions due diligence is separate from the due diligence process required under the A&D regime. Where there is an overlap, the CATP will not be required to duplicate due diligence.

The FCA’s discussion paper suggests that the consumer duty, which mandates a higher standard of care for firms towards their retail customers beyond the requirements under the A&D regime, should be applied to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) activities of stablecoin issuance and custody for retail customers. This will include all firms that can determine or have a material influence over retail customer outcomes. For example, if firms have a role in the design of communications sent to retail customers, then the duty will apply to them.

Businesses and firms in the cryptoasset market may need to meet other requirements in relation to disclosure, according to the paper. For example, the proposed future fiat-referenced stablecoins regime may include disclosure requirements that intersect with those introduced under the A&D regime. There will also be changes to the Money Laundering Regulations perimeter and registration requirements under the new cryptoasset regime. In addition, the financial promotion regime will apply to disclosure documents, unless an exemption applies under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.