‘Mother, may I?’ UK regulator’s proposed crypto rules too broad, warns lawyer

The UK’s Financial Conduct Authority this week released a proposal on how best to regulate cryptocurrencies in Britain, focusing on stablecoins, staking and trading platforms.

But the wording from the financial watchdog should raise concerns about a possible expansive regulatory framework, one lawyer has said.

“It does appear that the FCA is dead set on doing this — on making crypto in the UK a ‘mother, may I’ industry where everything in it needs to get permission in order to operate in the UK,” Bill Hughes, senior counsel and director of global regulatory matters at Ethereum software company, Consensys, told DL News.

The FCA’s proposal comes ahead of a sweeping crypto bill, which will come into force in the UK by October 2027.

The consultation is open to comments until June. The FCA did not immediately respond to questions from DL News. 

The wording 

The concern, said Hughes, a US lawyer, is over wording that would make a large number of entities have to register with the FCA.

The FCA’s proposal reads that “no person may carry on a regulated activity in the UK by way of business unless they are authorised or an exemption applies.”

The regulated activities, according to the document, include “dealing in qualifying cryptoassets as principal or agent, arranging deals in qualifying cryptoassets, safeguarding and arranging safeguarding of qualifying cryptoassets and relevant specified investment cryptoassets, issuing qualifying stablecoins in the UK and arranging qualifying cryptoasset staking.”

It isn’t clear what the FCA means by “arranging deals” in cryptocurrencies, and whether it would include simply custodying crypto in a digital wallet.

Hughes argued that this is broader than legislation approved in both the US and EU and if approved, could “would be the most expansive regulatory regime in terms of the entities that would need to register in order to operate with touch points.”

Difference with the US 

Hughes added: “The UK’s regime is going to be more burdensome and more and more industry capturing than either what the EU has in place under MiCA or what the US appears to be putting in place under the Trump administration.”

The lawyer argued in a post on X that while the US Securities and Exchange Commission had moved to allow non-custodial interfaces to facilitate token trading if done in a neutral fashion, the FCA was trying to push for the opposite with its wording.

“Interfaces through which a user may buy or sell crypto would be deemed as offering a service that must be approved by the FCA (and follow all the rules in the FCA handbook on a going forward basis) before it can be offered to/accessed by the UK public,” he wrote.

The US under Trump has taken a markedly different approach to watchdogging the space, putting pro-crypto people in high positions at regulatory bodies, signing executive orders aimed at fostering innovation and scrapping lawsuits against top digital asset companies.

Opposition lawmakers in the US have argued that while allowing for innovation in the crypto space to flourish, the Trump family has lined its pockets with numerous projects at the expense of would-be investors.

The UK’s economic and finance ministry, His Majesty’s Treasury of the UK Government, will have to approve of the FCA’s new rules.

DL News reached out to the Treasury for comment.

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.