In a previous article discussing the application of the FCA Handbook to cryptoasset service providers (“CASP”) we noted that the Consumer Duty (“the Duty”) applies in full to CASP firms, subject to two specific exemptions. In this article we discuss the requirements outlined in the FCA’s Finalised Guidance FG 26/5 (Application of the Consumer Duty to Cryptoasset Firms‘) published on 30 June 2026 and how these two limited exemptions apply.
Background to the guidance
The Finalised Guidance FG 26/5 does not create new obligations, rather, it clarifies the application of the existing Consumer Duty framework under Principle 12 which states “A firm must act to deliver good outcomes for retail customers”. Principle 12 is the cornerstone of the FCA’s Consumer Duty regime which requires firms to act to deliver good outcomes for all customers, including those in vulnerable circumstances. The guidance provided in FG 26/5 aims to help cryptoasset firms understand the FCA’s expectations – it is therefore illustrative rather than prescriptive and firms retain the flexibility to decide how they meet the Duty’s outcomes. Worked examples of good and poor practice are included and provide insights into the FCA’s expectations.
Cryptoasset firms should also refer to other published FCA documents, including the Final non-Handbook guidance for firms on the Consumer Duty (FG 22/5), the fair treatment of vulnerable customers (FG 21/1) and Cryptoasset Financial Promotions (FG 23/3).
Exemptions for application of the Duty
There are two specific exemptions in relation to the application of the Duty to CASPs:
- Trading between participants of a qualifying cryptoasset trading platform. The FCA’s view is that the dedicated CRYPTO 6 conduct rules provide equivalent protection for that activity and applying the Duty on top would be disproportionate.
- Public offers and admissions to trading for qualifying cryptoassets other than UK-issued qualifying stablecoins. For UK-issued qualifying stablecoins, the Duty applies in full, including to activities related to public offers and admissions to trading.
If your CASP does not qualify for one of the two exemptions detailed above, the Duty will apply in full.
Application of the Duty
The Duty applies to firms undertaking retail market business for retail customers in the UK and the new cryptoasset activities, as defined in the Financial Services and Markets Act 2000 (Cryptoassets) Regulations, fall within the definition of retail market business. The extent of a cryptoasset firm’s responsibilities under the Duty will depend on the firm’s role and the extent of its influence over retail customer outcomes. The FCA provides the example of a UK authorised stablecoin issuer which does not have any direct interaction or contractual relationship with retail buyers of its stablecoin – in this example the firm will mainly have influence over retail customer outcomes through the design of the stablecoin.
To establish how the Duty should be applied, or in certain circumstances disapplied, cryptoasset firms will need to establish to what extent their products and services are offered to ‘retail customers’ – essentially whether they are a crypto asset ‘manufacturer’ or a cryptoasset distributor. Examples of firms that would meet the definition of a ‘manufacturer’ would be:
- Issuers of qualifying cryptoassets or stablecoins
- Firms operating cryptoasset lending and borrowing services – the firm would be a manufacturer of the lending and borrowing service and a distributor of the cryptoassets being lent or borrowed as part of the service; or
- UK qualifying cryptoasset trading platforms (“UK QCATP”) providing a service of trading on the platform – the firm would be a manufacturer of the trading platform product and a distributor of the cryptoassets traded on the platform.
Cryptoasset manufacturers may sometimes fall outside of the scope of the Duty, for example where cryptoassets are manufactured by unauthorised persons based outside of the UK or have no identifiable issuer (e.g. Bitcoin). Otherwise, where manufacturers of cryptoassets are UK-authorised firms, and those cryptoassets are offered to ‘retail customers’, they will be subject to the Duty.
Examples of cryptoasset distributors include:
- Intermediaries selling qualifying cryptoassets and
- UK QCATPs offering qualifying cryptoassets on their platform (as mentioned above).
Working out who you are in the chain
The obligations differ depending on whether a firm is acting as a manufacturer, a distributor, or both. Firms must therefore establish their role in the cryptoasset service chain as a first step in implementing the Duty.
As described above, a firm running a lending and borrowing service is the manufacturer of that service, but only a distributor of the cryptoassets that are being lent. A UK QCATP operator is the manufacturer of its trading platform and a distributor of the assets that are traded on it. Many firms will therefore find themselves wearing both manufacturer and distributor hats simultaneously and will need to meet both sets of obligations accordingly.
The harder question for distributors is what to do when the manufacturer is unregulated, overseas, or simply unidentifiable — as is the case for bitcoin and many other unbacked cryptoassets. Distributors must take “all reasonable steps” to assess the product’s risk profile and target market using whatever information is available, for example, public disclosures, market size and liquidity, the reliability of the manufacturer’s jurisdiction with the absence of good information being treated as a risk signal rather than a reason to proceed without appropriate scrutiny.
Three cross-cutting rules, applied to crypto-specific risk
Acting in good faith means not exploiting unfamiliarity that customers may have with concepts such as staking, blockchains or decentralised finance, and being upfront and clear about costs that are easy to hide.
Avoiding foreseeable harm does not mean shielding customers from the volatility of cryptoassets. Firms will not be required to prevent customer losses, rather work to prevent losses originating from activities that the customer did not understand or accept.
Enabling customers to pursue their financial objectives means product design and communications should not be contrary to what the customer is actually trying to achieve, for example, overemphasising yield or price appreciation whilst downplaying volatility and liquidity risks.
Four outcomes — the practical building blocks
Products and services – Define your target market at a granular level, particularly for products that the FCA regards as inherently complex, for example, lending and borrowing. Leveraged products, in particular, require a target market that is able to absorb leveraged downside moves.
Price and value – Whilst firms are not responsible for the price volatility of cryptoassets (since outside the control of a firm) they are responsible for the fees and charges levied on the services (firms can control trading fees, staking commissions, withdrawal costs, etc). Firms must test whether those fees and charges are reasonable relative to the services that the customer receives (and not whether the underlying asset went up or down).
Consumer understanding – Plain language, tested comprehension, and information delivered at the point of service delivery when it is needed (and not just at customer onboarding). The guidance specifically mentions “auto-staking” products where customers may set and forget, making proactive communication about changing terms, including changes to fees, unbonding periods and access restrictions, more important than for products that are actively monitored by customers.
Consumer support – Support must be both accessible and responsive throughout the business relationship (and not just at sign-up), with particular attention paid to wallet freezes, staking failures and protocol upgrades. Friction should exist where it protects customers and not where it makes it needlessly hard for customers to exit, withdraw to self-custody or raise a complaint.
Where to start
If you are building out Consumer Duty compliance for a cryptoasset authorisation, the practical starting point is to map your products against the manufacturer / distributor framework to provide a classification that helps determine which specific obligations are applicable. From there, performing a fair value assessment and target market definition exercise are key and likely to be requested by the FCA.
Contact
Vedrana Kovacevic-Jalisi
Senior regulatory consultant
