FCA seeks feedback on crypto market abuse and transparency rules

The UK’s Financial Conduct Authority (FCA) has released a discussion paper as part of its ongoing efforts to regulate the cryptocurrency market.

The paper focuses on two key areas: crypto asset disclosures and market abuse regulations.

In its plans, the FCA intends to expand its regulatory authority beyond its current Anti-Money Laundering and promotions supervision to include areas such as crypto asset trading, stablecoin regulation, custody, and intermediation.

Under the proposals, crypto asset offerings will be restricted unless an exemption is applied, such as when the offer is made via a crypto asset trading platform (CATP) or to qualified investors like institutional entities.

The FCA is considering mandatory due diligence and disclosures for these assets before they can be listed on CATPs.

“If public offers are made, they will be prohibited unless an exemption applies,” the FCA said, noting that public disclosures must meet specific standards.

Failure to comply could lead the FCA to direct firms to provide compensation for breaches in financial promotions.

The paper also highlights market abuse issues within the crypto space.

While the FCA acknowledged that the existing civil market abuse regime for traditional finance cannot be directly applied to crypto assets, it is looking to adapt the regime to address crypto-specific challenges.

The FCA has referred to the International Organisation of Securities Commissions’ crypto market recommendations in shaping its proposals.

Moreover, the FCA is exploring ways to facilitate cross-platform information sharing to detect market abuse.

“For example, if CATP 1 offboards User A, and where User A has an existing account with CATP 2, information gathered by CATP 1 on User A’s suspected market abuse behaviour could be shared with CATP 2. Such information could help CATPs to make more informed decisions,” they noted.

The consultation process will run until March 14, 2025, and the FCA is seeking input from both domestic and international stakeholders, particularly from the wholesale sector.