Partner Ben Wolfe has provided comment in Law360 on the Financial Conduct Authority’s proposed crypto regulatory regime and the risks it poses to consumers.

Commenting on the consumer impact of opening cryptoassets, Ben noted: “Opening cryptoassets to consumers creates an unavoidable tension – the FCA is trying to reduce harm through regulation, but regulation itself can create a halo effect.

“Once a class of asset is placed inside a regulatory framework, consumers may assume it is safe, even when the FCA is explicit that it is not. The proposed summary disclosure and due-diligence requirements are sensible, however they do not change the underlying volatility, complexity or speculative nature of many cryptoassets.

“For retail consumers, this remains a very risky market and there will be concern that FCA oversight will lead to consumers believing that crypto is safer than it really is.”

Addressing whether the FCA’s disclosures will prevent harm to consumers, Ben said: “The FCA acknowledges that disclosure alone will not prevent consumer harm – the real question for the regulator is what level of harm to consumers is society prepared to tolerate?

“Historically, the FCA has been sceptical of crypto, often likening it to gambling, but we are now seeing a shift driven by the Government’s growth agenda.

“The difficulty is that the Government is yet to communicate what level of risk it is prepared to accept to the FCA, instead leaving that decision to a reluctant regulator. As a result, the FCA is being forced to make an inherently political trade-off under the guise of technical regulation.

“This reflects government indecision, a lack of confidence, and an attempt to avoid accountability if consumers ultimately lose out.”

Ben added: “Allowing unauthorised overseas firms to target UK institutional investors creates enforcement and leakage risks. For example, once foreign firms are marketing into the UK, the line between institutional and retail investors can blur, particularly when operating online.

“There is therefore significant risk that bad actors – including individual fraudsters, organised crime, terrorist groups and malign state entities – who may nominally target institutions, will also focus on retail consumers. This could increase UK consumers’ exposure to fraud or mis-selling, especially where firms sit outside the FCA’s jurisdiction.  

“Unless the regime is actively regulated and the FCA allocated sufficient additional resources to do so, there is a significant risk that this opens a gateway to further harm, rather than creating a protective firewall for consumers.”

Ben’s comments were published in Law360, 16 December 2025.