Financial Conduct Authority consults on guidance applying the Consumer Duty to cryptoasset firms

The Financial Conduct Authority has published draft guidance for consultation on how firms carrying on regulated cryptoasset activities should apply the Consumer Duty when serving UK retail customers. It is aimed at firms seeking Part 4A authorisation for regulated cryptoasset activities, and existing Financial Services and Markets Act 2000 authorised firms already subject to the Duty that plan to add cryptoasset permissions via a variation of permission. The draft clarifies that the Duty applies to retail market business involving UK retail customers and is intended to operate in the same way as for other regulated activities, while addressing crypto-specific features such as overseas or unidentifiable manufacturers and unfamiliar terminology. It distinguishes manufacturer and distributor responsibilities and stresses that distributors must still define an appropriate target market, assess risks and fair value, and take all reasonable steps to meet their obligations even where the manufacturer is unregulated or unknown, including reassessing or stopping distribution where benefits or value cannot be substantiated. For UK Qualifying Cryptoasset Trading Platform operators, the Duty applies to marketing, distribution and other operator functions, but not to trades executed under the platform’s non-discretionary trading rules, and any Duty-based decision to halt trading is expected to be very exceptional. The FCA also limits Duty application within the Admissions and Disclosures regime by applying it to UK-issued qualifying stablecoins but not to other qualifying cryptoassets under the Designated Activities Regime, and sets expectations across the four outcomes on product governance, price and value, consumer understanding and consumer support, including around hidden or disproportionate charges and barriers to withdrawal or exit.