The FCA’s proposed cryptoasset regime is a significant step in bringing crypto markets within the UK’s wider financial services framework.
CP25/41 deals with two core market integrity issues: admissions and disclosures, and market abuse. Together, these proposals would create a new conduct framework for cryptoassets, covering admission to trading and ongoing conduct once trading begins.
What is the Admissions and Disclosures regime?
The proposed Admissions and Disclosures (A&D) regime focuses on what enters the market.
The FCA is proposing that cryptoasset trading platforms (CATPs), should act as gatekeepers before admitting qualifying cryptoassets to trading. This means setting risk-based admission criteria and assessing whether admitting a cryptoasset could be detrimental to retail investors.
The FCA gives examples such as fraud, misconduct, poor governance, or technical arrangements that could enable manipulation. This matters because many risks in crypto arise before trading starts. Unclear tokenomics, conflicts, code vulnerabilities or misleading claims can harm consumers and undermine confidence.
What due diligence will CATPs need to carry out?
CATPs would be required to conduct due diligence before admitting a qualifying cryptoasset to trading.
This could include checking whether key persons are credible, whether the asset’s claimed features align with the underlying code or observable on-chain behaviour, and whether token supply disclosures are supported by evidence.
In most cases, a qualifying cryptoasset disclosure document, or QCDD, would need to be prepared and published before admission. The QCDD is intended to give investors clear information about the asset, its risks, governance and technical features.
If there is a significant new factor, material mistake or material inaccuracy before admission, a supplementary disclosure document may also be required.
For firms, admission will not be a purely commercial decision. It will need to be supported by governance, due diligence, records and a clear rationale.
What is MARC?
The second limb of CP25/41 is the proposed Market Abuse Regime for Cryptoassets, known as MARC.
At a high level, MARC applies familiar market abuse concepts to cryptoassets. It focuses on insider dealing, unlawful disclosure of inside information and market manipulation.
However, crypto markets do not operate like traditional securities markets. Trading can take place across multiple platforms, on-chain and off-chain. Some cryptoassets may not have a conventional issuer. Information may also be shared through websites, social media or blockchain activity.
Under MARC, responsibility for inside information would not sit only with issuers. Issuers, offerors and CATPs could all have responsibilities to disclose inside information that directly concerns them. The FCA is also proposing guidance on when information should be treated as public and when pending orders, vulnerabilities or changes to trading status may constitute inside information.
What systems and controls will firms need?
CATPs and intermediaries would need systems and controls to prevent, detect and disrupt market abuse.
This includes monitoring orders and transactions, escalation, staff training, record keeping and managing sensitive information.
For larger CATPs, the FCA is proposing on-chain monitoring. This is a key difference from traditional finance. Market abuse in crypto may involve wallet activity, token movements, wash trading or behaviour identifiable only through blockchain data.
How do A&D and MARC work together?
The A&D regime and MARC should not be viewed separately.
Admissions focus on what enters the market. MARC focuses on how the market behaves once trading begins. Together, they create a conduct framework running from admission due diligence through to ongoing surveillance.
Key areas to review include admission criteria, due diligence, disclosure arrangements, inside information procedures, surveillance, escalation routes, insider lists, information barriers, outsourcing and senior management oversight.
Firms familiar with UK MAR may have a useful starting point, but crypto market abuse risk will require a tailored approach.
What should Boards be thinking about?
For firms preparing for the future UK cryptoasset regime, now is the time to assess whether their compliance frameworks and governance arrangements are ready.
Proactive Boards should be discussing:
- How exposed is our business model to the proposed A&D and MARC regimes, and do we understand whether we may be in scope as a CATP, intermediary, issuer or offeror?
- Are our governance, disclosure and surveillance arrangements capable of supporting a more regulated crypto market, including on-chain monitoring where relevant?
- Could admissions, due diligence and market integrity controls become a source of competitive advantage, or a constraint on our ability to scale?
If you have any questions about this subject matter please contact our team of industry leading experts here at Cosegic.
