CryptoUK Response to FCA Consultation Paper CP25/42: A prudential regime for cryptoasset firms
On 16 December 2025, the Financial Conduct Authority (FCA) published a coordinated package of three crypto consultation papers, setting out the next phase of the UK’s digital asset regulatory framework. With our earlier responses now published, we are pleased to share the third and final of our three submissions. This response addresses CP25/42: A prudential regime for cryptoasset firms, which sets out proposed capital and prudential requirements for firms undertaking a broad range of regulated cryptoasset activities.
The consultation builds on CP25/15 and extends the proposed prudential regime beyond stablecoin issuance and safeguarding to include firms operating qualifying cryptoasset trading platforms, providing staking services, undertaking intermediation, and offering cryptoasset lending and borrowing. These proposals will play a central role in shaping how both crypto-native and traditional firms structure and capitalise their UK operations under the future regulatory regime.
In our response, members stress that appropriately calibrating the UK’s prudential regime is essential to supporting consumer protection while maintaining international competitiveness. Regulatory certainty is a necessary foundation, but a regime that disproportionately burdens UK-based firms risks pushing cryptoasset activity offshore. We also highlight concerns that widely traded overseas stablecoins are not treated as equivalent to UK qualifying stablecoins, despite their central role in global crypto markets.
Members note that while CP25/42 addresses elements that were missing from CP25/15, engaging with the prudential framework in stages has limited the industry’s ability to assess the regime as a whole. While we appreciate the constraints involved, firms would ideally have had the opportunity to consider the full framework in the round, particularly given the interdependencies across different parts of the regime.
The response also raises concerns about the absence of a transitional period for firms to meet new capital requirements. Crypto-native firms that have not previously been subject to regulatory capital rules may be placed at a competitive disadvantage, and all firms may be required to undertake complex and time-consuming capital restructuring simultaneously, potentially under significant market pressure.
We further highlight potential unintended consequences arising from the proposed expansion of “CRYPTOPRU activities”. In particular, traditional finance firms undertaking limited safeguarding activities in relation to tokenised traditional assets could be captured by CRYPTOPRU requirements, even where they are already subject to MIFIDPRU and where the relevant assets are already reflected in existing capital calculations. In such cases, the outcome risks being duplicative and disproportionate.
Finally, members express concerns about the calibration of the Category A cryptoasset conditions and the application of volatility adjustments that do not adequately reflect the risk profile of stablecoins. UK-centric assumptions fail to reflect the realities of crypto markets, where US-denominated stablecoins remain foundational. As a result, the proposals risk discouraging firms and liquidity providers from operating in UK crypto markets or booking risk to UK entities, potentially undermining wider government and regulatory objectives around innovation and growth.
This response completes CryptoUK’s engagement with the FCA’s current consultation package and reflects our continued focus on ensuring the UK’s crypto prudential regime is proportionate, workable, and internationally competitive.
