The Financial Conduct Authority (FCA) has published a consultation on a proposed prudential regime for cryptoassets firms.

The consultation is part of a much broader programme of work undertaken by the FCA as it works its way along the roadmap towards the regulation of cryptoassets, including a consultation on stablecoins and custodians, discussed here and here.

According to the FCA, the purpose of applying ‘proportionate prudential standards’ is that it will “support the development of cryptoasset markets in the UK while maintaining their integrity and reducing the potential harms that firms in these markets can cause”. This includes, for example, reducing the risk of firms failing, improving market confidence and competition, and protecting consumers.

As with the FCA’s other work in this area, the consultation is both extensive and, at times, highly technical. It sets out, among other things, (i) proposed rules relating to the definition of, and minimum requirements for, types or ‘tiers’ of capital that are eligible as regulatory capital (known as ‘own funds’), (ii) minimum liquidity requirements for firms and the types of assets that can be held in order to meet them, and (iii) proposals for monitoring requirements to address concentration risk.

The FCA adds that cryptoasset firms will be subject to the overall financial adequacy rule (OFAR) which requires that firms maintain financial resources that are adequate in both amount and quality for the business it undertakes. It also sets out that it is developing a sector-specific sourcebook – known as CRYPTOPRU – which, along with other sector-specific sourcebooks, will supplement an integrated prudential sourcebook – known as COREPRO – that will bring together core prudential requirements common across the different types of firms it regulates.

The consultation closes on 31 July 2025 and can be read in full here.