UK Crypto Rules Win Praise for Global Liquidity Access, but Licensing Hurdles Remain

The UK Financial Conduct Authority has unveiled a new regulatory framework for crypto assets, prompting a mixed response from the industry. Market participants welcomed the framework’s accommodation of global liquidity, while highlighting steep licensing requirements as a major challenge.

CoinDesk reported on July 4 that the FCA formally released its crypto regulatory package. The framework introduces a Qualified Cryptoasset Trading Platform, or QCATP, model that would allow overseas exchanges to serve UK clients through locally authorized entities. It also permits the circulation of stablecoins issued outside the UK.

Industry participants said the framework takes a more open approach than the European Union’s Markets in Crypto-Assets regulation, or MiCA, because it allows access to overseas exchanges and global liquidity. Katie Harries, Coinbase’s head of European public policy, called the FCA’s publication of final crypto rules an important milestone for improving regulatory clarity and strengthening the UK’s competitiveness in digital-asset innovation.

Christopher Collins, a financial markets and regulation partner at Katten Muchin Rosenman, said the QCATP model could give UK investors better pricing and trading conditions by allowing them to use existing global trading infrastructure rather than a separate UK liquidity pool.

Still, the framework leaves several issues unresolved. Harries said the initial proposal could make it effectively difficult for centralized trading platforms to provide access to decentralized finance, or DeFi, services. That could leave the UK out of step with major jurisdictions such as the US, where DeFi is being considered as part of tokenization strategies.

Collins added that the FCA has yet to specify which overseas jurisdictions would qualify as offering a comparable level of regulatory protection. That leaves firms with insufficient clarity to design their UK business models.

The biggest challenge may be the difficulty of the licensing process. Thomas Cattee, a partner at Gerson Solicitors, said more than 85% of applications under the existing anti-money laundering registration regime were either rejected or withdrawn. He said the new framework introduces much broader requirements covering consumer protection, prudential standards, operational resilience and senior management accountability, sharply increasing the risk of licensing failure.

Cattee also pointed to licensing bottlenecks in Europe during the rollout of MiCA, when many firms delayed applications until just before the deadline. He said companies in the UK should begin preparing for the authorization process early.