UK Financial Conduct Authority Drives Out Business And Hurts Consumers
“UK Financial Conduct Authority Drives Out Business And Hurts Consumers“ Forbes, 17 March 2025
The UK has long been a global financial leader, built on clear regulations, economic stability, and an open market. But the UK's approach tells a different story regarding bitcoin and digital assets. Rather than encouraging innovation, regulators have sown uncertainty, which has resulted in driving businesses away, eroding competitiveness, restricting choice, and ultimately harming investors.
The Financial Conduct Authority, the UK’s financial markets regulator, has taken an approach that discourages growth and misclassifies fundamentally different assets under the same restrictive policies.
Bitcoin And Other Cryptoassets
Despite bitcoin's distinct characteristics, the FCA groups it with all cryptoassets under the 'restricted mass market investments' label. This blanket classification ignores bitcoin’s unique properties, creating unnecessary barriers for businesses and investors.
Failing to distinguish bitcoin as a decentralized monetary network from speculative crypto tokens undermines the UK’s position as a competitive financial hub. This broad-brush approach creates regulatory uncertainty, discourages institutional adoption, and pushes businesses to more welcoming jurisdictions.
Unlike speculative tokens and memecoins, bitcoin is a decentralized digital asset with a fixed supply secured by a global network of miners. It has no central issuer, no controlling authority, and cannot be altered or inflated by any single entity. Its supply schedule is predetermined, ensuring transparency and security unmatched by other digital assets.
By contrast, other cryptoassets, including tokens launched on smart contract platforms, function more like fintech startups or investment vehicles. A small group of insiders often controls these assets, which can be altered or inflated and sometimes lack the long-term security and liquidity that bitcoin has established over the past 16 years.
Meme coins, for example, can be created in minutes, issued with no oversight, and promoted purely to generate speculative trading activity. Unlike publicly traded companies that must meet strict financial disclosure requirements, these tokens have no obligation to disclose insider holdings, governance structures, or financials. The FCA’s failure to differentiate between bitcoin and these speculative assets has led to a regulatory framework that does not reflect the reality of the market.
The Regulatory Environment And Its Consequences
The FCA’s stance has had tangible consequences for the UK’s financial market, retail investors and businesses. Regulatory uncertainty has forced companies to shut down operations or avoid entering the market altogether. PayPal, CoinCorner, and Skrill have adjusted or withdrawn their UK services, citing excessive restrictions and unclear policies.
At the same time, major financial institutions have hesitated to engage with digital asset firms, with many banks severing ties or restricting access to essential financial services. This has made it increasingly difficult for UK-based cryptocurrency exchanges to operate, forcing consumers who wish to buy or trade bitcoin legally to face unnecessary friction. As a result, many are pushed toward offshore or unregulated platforms, increasing their exposure to risk and reducing access to well-regulated, reputable services.
Jurisdictions like the US, UAE, and Singapore have taken more nuanced approaches. The US Securities and Exchange Commission has begun recognizing the distinction between bitcoin and other digital assets, allowing major financial institutions to launch bitcoin exchange-traded funds. The UAE’s Virtual Assets Regulatory Authority has created a licensing regime that accommodates different types of digital assets without applying a one-size-fits-all approach. By contrast, the UK’s approach has discouraged investment and innovation, affecting its status as a global financial leader.
The FCA’s Blind Spot
While bitcoin continues to solidify itself as a monetary asset with global acceptance, thousands of new crypto tokens are created each year, many with little to no inherent value.
Meme coins, in particular, illustrate the risk of failing to distinguish between different types of digital assets. These tokens are often launched as short-term speculative plays, relying on viral marketing rather than fundamental utility. The FCA has stated its commitment to consumer protection, but its current stance does little to curb the risks associated with these tokens. A more tailored approach, where high-risk assets face stricter requirements while established assets like bitcoin are treated more appropriately, would better align with the FCA’s objectives.
Charlie Morris, founder of ByteTree, an investment research firm, highlights this misalignment. He said “The FCA have taken a cautious approach, which was perhaps understandable given bitcoin’s past erratic nature. But the space has matured, and it’s clear that bitcoin will be an important part of the financial landscape for years to come. It’s time to revisit this policy.” Despite this, the FCA continues to apply the same outdated classification, restricting legitimate bitcoin businesses while allowing unregulated token issuances to spread.
Currently, anyone can create and market a new token without any regulatory barriers, yet legitimate bitcoin services face significant restrictions. This imbalance is counterproductive. A regulatory framework should impose appropriate listing and disclosure requirements for speculative tokens, while simultaneously allowing bitcoin businesses to operate with clarity. This approach would enhance consumer protection and industry stability.
The UK’s Position As A Financial Hub
The UK has historically been a leader in financial services, but its approach to digital assets risks causing it to fall behind global competitors. Businesses that once considered the UK are now choosing jurisdictions with clearer regulations. Capital and talent are leaving, weakening the UK's position as a global financial hub.
While the UK hesitates, other nations are making historic steps. The U.S. government has officially established a Strategic Bitcoin Reserve, recognizing bitcoin’s role as a long-term financial asset.
Despite growing global recognition of bitcoin as a legitimate asset class, financial institutions that wish to offer bitcoin-related products face hurdles. This regulatory uncertainty has limited the UK’s participation in what is becoming a significant sector of financial markets. Countries that embrace a more structured and proportionate approach are attracting the world’s top fintech and blockchain startups, while the UK remains a difficult environment.
Regulation That Works
If the FCA aims to support consumer protection while maintaining the UK’s competitiveness, a reassessment of its approach is necessary. Key areas for refinement include:
Recognizing bitcoin as distinct from other cryptoassets. Bitcoin’s decentralized, energy-secured nature differentiates it from newly issued tokens. A tailored regulatory framework acknowledging these differences would provide clarity for businesses and investors.
Implementing stronger oversight for speculative assets. New token issuances should be subject to disclosure and transparency requirements like those in traditional financial markets. This would help curb fraud while allowing progress.
Creating a supportive environment for reputable businesses. Excessive restrictions drive businesses offshore, increasing consumer risk. A balanced regulatory approach would encourage companies to operate within the UK under appropriate oversight.
David Parkinson, CEO of Musqet, a UK-based bitcoin payment provider, explains how a more bitcoin-friendly tax policy could transform the UK's economic prospects. He told Forbes, "Removing capital gains tax on bitcoin would unlock tremendous value for the UK. Demand for bitcoin as an investment is high, and removing this barrier would trigger significant capital inflows, as seen with ETF approvals in the U.S. Enabling Bitcoin for everyday transactions would also signal the UK's openness to innovation, especially timely following the government's abolition of the Payment Systems Regulator. Above all, reducing regulatory burdens and clearly distinguishing bitcoin from other digital assets would be a step in the right direction."
The UK has an opportunity to refine its approach, ensuring it aligns with both consumer protection goals and the UK’s economic interests. Engaging in ongoing dialogue with industry participants and aligning with global best practices would help reestablish the UK as a leading jurisdiction for digital assets rather than a market that businesses are forced to leave.
The FCA faces a choice. It can continue down a path that drives businesses away, or it can create a regulatory environment that supports growth while protecting consumers. Other financial hubs are adapting, and the UK cannot afford to fall behind. Without a course correction, businesses and capital will keep leaving, taking the UK’s reputation as a financial leader with them.
In this comment provided to Forbes, Sam Roberts, Director of Investment Consulting at Cartwright Pension Trusts, summarized the FCA’s current stance as contradictory to its stated goals, reinforcing the need for clear differentiation between bitcoin and other cryptoassets. He said, "The FCA has stated that it wants to reduce risks without stifling growth and innovation, reduce consumer harms, and promote confidence and trust in the UK cryptoasset market. However, by failing to explicitly recognise the difference between bitcoin and other cryptoassets it is fundamentally failing all three of its own objectives. Until the FCA understands and recognises what sets bitcoin apart, its legacy will be viewed as deeply irresponsible and a barrier to the future prosperity of the UK."