On 16 December 2025, the Financial Conduct Authority (FCA) published three major consultation papers—CP25/40, CP25/41, and CP25/42—that collectively outline proposals for a comprehensive UK crypto regulatory regime.

This marks a significant escalation in regulatory clarity and ambition, signaling that the "wild west" era of crypto is officially being replaced by a framework aligned with traditional financial services.

1. The Three Pillars of the New Regime

The FCA’s approach is clear: apply familiar financial-services principles to crypto markets while leaving room for innovation. The three papers break down the regime as follows:

• CP25/40: Regulating Cryptoasset Activities – This covers the "how-to" for trading platforms, intermediaries, lending, borrowing, and staking. It also provides the FCA's early thinking on how to bring DeFi protocols within the regulatory perimeter.
• CP25/41: Admissions & Disclosures and Market Abuse – This introduces the MARC (Market Abuse Regime for Cryptoassets). It sets strict requirements for token listings and prohibits insider trading and market manipulation.
• CP25/42: Prudential Requirements – This focuses on financial resilience, introducing capital requirements like the Permanent Minimum Requirement (PMR) and K-factors to ensure firms can weather operational and market shocks.

2. Why This Matters Now: The 2027 Horizon

This is no longer a "future possibility." These proposals align with government legislation expected to bring crypto activities fully within financial services law by October 2027.

Key takeaway for firms: The FCA continues to warn that cryptoassets remain high-risk, but these proposals provide the "rules of the road" that will determine who is allowed to operate in the UK market. Firms that fail to engage with the consultation process by the 12 February 2026 deadline may find themselves struggling with a final rulebook that doesn't fit their specific business model.

3. What Firms Should Be Doing Today

If you are building, hosting, or supporting crypto products—including exchanges, wallets, or staking providers—the clock has started.

• Impact Mapping: Determine which specific K-factors or PMR levels (ranging from £75k to £750k) apply to your business under CP25/42.
• Surveillance Review: Assess your current ability to detect market abuse as defined under the new MARC framework.
• Governance Check: Review your UK legal entity structure; the FCA has signaled a strong preference for firms to have a UK subsidiary to serve retail clients.
• Consultation Response: Draft and submit your feedback to the FCA before 12 February 2026.

4. How MEMA Consultants Can Help

Navigating three concurrent consultation papers totaling hundreds of pages is a massive undertaking. MEMA Consultants helps firms turn these complex proposals into clear, defensible operating models.

We support you with:

• Regulatory Impact Assessments across your product set.
• Gap Analysis of current controls vs. MARC and prudential expectations.
• Drafting robust consultation responses to help shape the final rules.

If crypto regulation is on your roadmap for 2026 and beyond, now is the time to act.

This article is for general information only and does not constitute legal, regulatory, or investment advice.

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