Global Digital Finance (GDF) and the Crypto Council for Innovation (CCI) have submitted their response to the FCA’s proposals for a new prudential framework for UK cryptoasset firms.
While both organisations support the FCA’s objective of creating robust regulation, they caution that the current proposals are overly rigid and misaligned with international standards, potentially discouraging UK participation in the growth of digital assets.
“We urge the FCA to refine the framework to ensure it is robust but not excessive, aligned with international norms, and adaptable to the rapidly evolving nature of the sector,” the response states.
“A well-calibrated regime will attract high-quality firms to the UK, strengthen regulatory oversight, and support the government’s ambition to make the UK a global hub for digital finance.”
As a solution, GDF and CCI advocate for a more internationally consistent, proportionate, and risk-sensitive approach. They argue that this balance would allow innovation to thrive while maintaining appropriate safeguards.
Key areas of concern include the UK’s global competitiveness, the treatment of crypto and intangible assets, calibration of risk metrics, clarity around operational cost calculations, liquidity requirements, foreign exchange exposure, use of custodians, and the management of client and asset concentration.
One of the central issues raised is competitiveness. The FCA’s proposed capital and liquidity rules are significantly stricter than those in other key jurisdictions, including the EU, US, and Singapore, GDF and CCI argue
They warn that without alignment, the UK may become a less attractive base for digital asset firms, limiting domestic growth and innovation.
They also call for consistency in the treatment of intangible assets, recommending the FCA avoid blanket deductions that fail to reflect their real economic value.
On foreign exchange (FX) risk, they advise against a blunt, Pillar 1-style capital charge. Instead, they propose embedding FX risk management, including hedging and governance, within the ICARA process.
The response also calls for practical guidance to help firms identify connected clients within the anonymised nature of crypto markets.
