UK FCA launches major consultation on crypto regulations; retail investors shrink by 2025 but holdings become more "concentrated"

The UK Financial Conduct Authority (FCA) recently launched a comprehensive consultation on its future cryptocurrency regulatory framework, covering key areas such as asset listing disclosures, trading platform operations, market abuse, DeFi, and staking. The consultation period will last until February 12, 2026. Meanwhile, the latest market research commissioned by the FCA found that the cryptocurrency ownership rate among UK adults has decreased from 12% in 2024 to 8% in 2025, but the average asset size held by owners is increasing. These two dynamics together paint a picture of transformation in the UK crypto market: on one hand, the regulatory framework is tightening systematically to align with traditional finance; on the other hand, market participants are shifting from retail-dominated to more mature investors with stronger capital.

FCA Comprehensive Consultation: A Rulemaking Shaping the Industry Landscape for Years to Come

The consultation document released by the UK Financial Conduct Authority (FCA) this week marks a significant step toward building a comprehensive crypto regulatory system in the country. This detailed proposal aims to regulate the crypto market using a “similar approach” to traditional financial markets, with the core goal of protecting consumers while supporting responsible innovation and ultimately establishing an open, sustainable, and trustworthy market.

The scope of the consultation covers nearly every critical aspect of the crypto ecosystem. From asset listing admission and disclosure rules to measures to prevent market abuse (such as insider trading and market manipulation); from security and reliability standards for trading platforms to behavioral requirements for intermediaries (such as brokers). Notably, the consultation also delves into complex activities like staking and lending, and unprecedentedly includes decentralized finance (DeFi), asking whether the same rules applied to traditional finance should also be applied here. These proposals are based on early feedback and new research, aligned with the latest legislative framework announced by the UK government, demonstrating the regulator’s determination to “get it right the first time.”

David Geale, FCA’s Director of Payments and Digital Finance, emphasized: “Regulation is coming — we want to do it well.” This statement clarifies the industry’s direction. Before the final rules are established in 2026 and expected to be implemented in 2027, this consultation provides a valuable opportunity for industry voices to be heard, directly influencing future costs, compliance thresholds, and business models operating in the UK.

The Truth Behind Market Data: Sharp Decline in Holders, but “Value” Increasing

Alongside regulatory actions, the FCA commissioned YouGov to conduct the 2025 UK Cryptocurrency Consumer Study. Data shows that the cryptocurrency ownership rate among UK adults has dropped significantly from 12% in 2024 to 8%. This change is often interpreted as a cooling of market enthusiasm, but the underlying structural shift is more intriguing.

Although the total number of holders has decreased, the remaining investors’ average holdings are increasing in value. The report indicates that the proportion of users holding assets between £1,000 and £5,000 has increased by 4 percentage points to 21%, and those holding between £5,001 and £10,000 have increased by 3 percentage points to 11%. Meanwhile, the proportion of users holding less than £100—extremely small amounts—continues to decline. This suggests that speculative retail investors are exiting, while a group of investors with stronger financial capacity, potentially more inclined to hold long-term, is forming. The market is experiencing a “de-retailization” pain point, but the overall “value” of funds may not be shrinking proportionally.

Key Data on the UK Cryptocurrency Market in 2025

User and Holding Behaviors:

• Adult Ownership Rate: 8% (2024: 12%, 2021: about 4%).
• Public Awareness: remains high at 91%.
• Holding Structure Changes: small holders (≤£100) decrease; medium (£1,001-£5,000) and mid-to-high (£5,001-£10,000) holders increase significantly.

Entry Points and Behavioral Preferences:

• Main Entry: 73% of users acquire assets through mainstream centralized exchanges like Coinbase, Binance (up 4% from 2024).
• Selection Criteria: Ease of use, reputation, and security are the top three factors influencing exchange choice.
• Risk Appetite: 63% of coin-holders are willing to take high risks for high returns (non-holders with awareness: only 24%).

Regulatory Attitudes (User Survey):

• Support for Stricter Regulation: 25% believe tighter regulation makes them more likely to invest.
• Demand for Loss Protection: 26% think regulation should include financial protection in case of platform insolvency to encourage investment.
• Resistance or Indifference: 11% say stricter regulation would reduce their willingness to invest; 25% see no impact.

The Art of Balance: Finding the UK Path Between “US Model” and “EU Model”

In the global crypto regulatory race, the UK is trying to carve out a “third way” distinct from the US and EU. Compared to the US’s long reliance on enforcement-based regulation and a legislative process hindered by political disagreements, the UK government and FCA are adopting a more coordinated, phased approach. From initially regulating financial promotion and anti-money laundering to now launching comprehensive legislative frameworks and consulting on detailed rules, the path is relatively clear and predictable.

Compared to the EU’s fully implemented Markets in Crypto-Assets Regulation (MiCA), the UK’s approach appears more flexible and principle-based. MiCA is known for its extensive, unified, and highly regulated rules, while the FCA’s consultation repeatedly emphasizes “proportionality” and “support for innovation.” Especially with its open-ended consultation on whether DeFi should be subject to traditional financial rules, it shows a cautious attitude toward new business models rather than rushing to a “one-size-fits-all” solution. This difference could give the UK a competitive edge in attracting innovative projects and complex financial arrangements compared to the heavily regulated EU.

However, challenges remain. How to implement “proportional regulation” in the rapidly evolving crypto space is a significant test. Additionally, the cautious regulation of stablecoins (pursued separately by the Bank of England) and the delegation of some systemic rule-making authority to the Treasury indicate that the final regulatory landscape will involve multi-agency collaboration, with internal coordination efficiency affecting the effectiveness of the rules. The UK aims to establish a regulatory ecosystem by 2027 that can earn global investor trust and nurture domestic crypto giants.

How the Industry Should Respond: From Passive Adaptation to Active Engagement

Faced with this consultation that will determine the future trajectory for years to come, crypto industry participants should not remain passive. Before the February 12, 2026 deadline, proactive and constructive feedback is crucial. For trading platforms, focus should be on operational resilience, client asset segregation, and market surveillance proposals, assessing compliance costs and impacts on business models. For DeFi protocols and staking service providers, the questions raised in the consultation directly relate to whether their core operations can be conducted compliantly within the UK, requiring careful study and clear articulation of their technical features and risk mitigation measures.

For investors and ordinary users, FCA’s research provides valuable market sentiment indicators. Although short-term participation has declined, regulatory clarity is a long-term positive. 51% of current coin-holders say that improved regulation (especially including loss protection) would encourage more investment. This suggests that once the new regulatory framework is implemented in 2027 and investor protection mechanisms similar to traditional finance are established, suppressed demand could be unleashed, attracting a broader range of cautious capital into the market.