The UK's Financial Conduct Authority (FCA) has proposed new regulations for cryptocurrency firms, aiming to foster innovation while ensuring market integrity and consumer protection.

These proposals include relaxing certain principles for crypto trading platforms, such as requirements for integrity, skill, and customer fairness, recognizing that these do not pose the same systemic risks as traditional financial firms.

The UK government emphasizes that these rules are designed to promote a secure, trustworthy environment and prevent fraud and abuse in the sector.

Crypto ownership in Britain has surged from 4% of adults in 2021 to 12%, underscoring the need for a balanced regulatory approach that supports industry growth and protects consumers.

The UK is also engaging in international cooperation, with discussions between UK and US officials to strengthen cross-border regulation of digital assets, involving major firms like Coinbase, Ripple, Bank of America, and Barclays.

Additionally, the Bank of England is considering limits on stablecoin holdings to prevent potential threats to financial stability, citing concerns over large-scale stablecoins causing credit destabilization.

The FCA’s approach seeks to balance fostering innovation with consumer protection, potentially serving as a model for other jurisdictions and influencing Europe’s digital asset regulations.

These developments are part of broader efforts to regulate digital assets in the UK, balancing innovation with consumer safety.

The proposed regulations aim to apply standards similar to traditional financial institutions, including operational resilience and anti-financial crime controls.

Despite easing some principles, the FCA is enforcing stricter operational risk measures, especially in response to a $1.5 billion hack of Dubai-based exchange Bybit, emphasizing cyber resilience.

The FCA is seeking public feedback on these proposals by November 12, with final rules expected to shape the UK’s approach to a sustainable and competitive digital asset sector.

These regulatory efforts follow the UK government’s draft legislation from February and April, which aim to establish a comprehensive framework for crypto assets and bring exchanges under existing regulations.