On January 26, 2026, the UK Financial Conduct Authority (FCA) officially launched the final consultation phase of its regulatory framework for crypto assets, presenting 10 key regulatory proposals to the market, pressing the final battle button in this years-long regulatory game. This consultation will last until March 12, 2026, and the FCA plans to officially open the licensing application window for crypto service providers in September 2026, indicating that the lifeline for the UK crypto business in the coming years is being drawn in advance. On the other side of the main conflict is a hard clash between market behavior standards and asset protection rules derived from the traditional financial system, and the decentralized, globalized, and highly volatile native characteristics of crypto. Whether the UK will use this new regulation to shape a crypto London that is "more like Wall Street," or force DeFi and long-tail innovations to reroute in regulatory gaps, will be the most critical suspense in the coming months.
London Takes Action: Ten Proposals Targeting the Crypto Gray Area
● National Roadmap and Political Background: This regulatory framework is explicitly included in the UK government's crypto roadmap, reflecting a strong industrial policy and financial center competition. After Brexit, the UK is eager to regain its voice in financial innovation, so the framework led by the FCA is not only a technical regulatory document but also a tool for London to reposition itself in the global financial landscape, aiming to attract compliant global crypto businesses under the premise of "safety and control."
● Main Structure of the Ten Proposals: According to publicly available information from the FCA, this round proposes 10 key proposals, focusing on traditional financial core elements such as market behavior standards, customer asset protection, risk disclosure, and product governance. The regulatory direction includes requirements for service providers on how to handle customer funds and tokens, how to comply with codes of conduct during trading and sales, and how to incorporate suitability and risk control in product design, but the technical details of each small item have not yet been fully disclosed, leaving the public to grasp the main logic rather than dissecting it item by item.
● Official Statement of Regulatory Goals: The FCA clearly states in its announcement that the purpose of the new regulations is not to create a "zero-risk" crypto market, but to "help investors better understand the potential risks of crypto investments, even if all risks cannot be eliminated." This positions the regulatory role as a translator of risks and a gatekeeper, rather than a market terminator, indicating that the regulatory body hopes to inform investors about what they are betting on and who is responsible for which aspects through information disclosure, standardized behavior, and clear boundaries of responsibility.
● Timing Considerations for Advancing the Final Consultation: The choice to enter the final consultation in early 2026 is partly due to the intensifying global race for crypto regulation, with major financial centers in Europe and the US competing for the pricing power of "compliant assets and institutions"; on the other hand, the rapid expansion of local crypto practitioners in the UK over the past two years, along with the accumulation of risk events and gray operations, has also created pressure. The FCA's move at this time not only sends a certain signal externally but also responds internally to the systemic concerns brought about by the disorderly growth of the industry.
From Bitcoin Street to On-Chain: The Misalignment and Adjustment Between Traditional Finance and Crypto Service Providers
● Industry Norms Under Rule Comparison: In the traditional financial system, market behavior norms require brokers and investment banks to conduct suitability assessments when selling products, avoid misleading promotions, and implement strict separation and auditing of customer assets; however, in the current crypto industry, phenomena such as mixed proprietary trading and market making by exchanges, extreme advertising amplifying returns, and blurred lines in custody and lending are common. The FCA's attempt to transplant the "bottom-line rules" of traditional finance into the crypto scene will inevitably touch upon many gray areas currently viewed as "default practices" in the industry.
● Systematic Increase in Compliance Costs: Once these standards are implemented in the UK, crypto exchanges, brokers, and custodians will need to establish more comprehensive KYC/KYB processes, customer asset segregation systems, independent risk and compliance teams, and align their reporting and disclosure with regulated financial institutions. This is an investment that large platforms or institutions with multiple licenses can bear, but it may pose a heavy burden on small teams and startups, shifting the entry threshold from "writing a white paper and building a front end" to "building a complete set of quasi-financial institution infrastructure."
● Friction from Tool Transplantation: Information disclosure and suitability assessments are key tools in traditional finance for controlling mismatches and misleading practices, but in the high volatility and high innovation frequency of crypto assets, they will face execution-level conflicts. The risk attributes of a token may change completely within weeks due to contract upgrades, governance changes, or liquidity fluctuations, requiring platforms to statically assess "who is suitable" before sales, which not only increases compliance burdens but may also be seen by market participants as stifling the pace of innovation.
● Compliance Dividends and Crowding Out Effects: In terms of outcomes, the new regulations are expected to bring clear "compliance dividends" to institutions willing to invest in compliance construction—gaining the trust of the UK market and traditional financial capital, while also attracting overseas licenses and institutional funds. However, the cost is that long-tail projects and small teams are likely to be crowded out of mainstream compliance channels, forced to turn to jurisdictions with looser regulations or retreat to purely DeFi scenarios on-chain, further compressing the space for "grassroots innovation" in the UK.
Restricting Credit Card Purchases on Chain? The Leverage Chain Triggered by Credit Purchase Terms
● Regulatory Logic Behind Restricting Credit Purchases: Among the 10 proposals, the restrictions on credit-based crypto asset purchases are particularly noteworthy. The regulatory thinking is to prevent retail investors from using credit cards, consumer loans, and other means to leverage seemingly "cost-free" investments in high-volatility assets, binding personal debt to price fluctuations. The FCA's investor protection motivation is to reduce behaviors that "bet today's coin price on future income," avoiding crypto volatility from amplifying into systemic risks for household balance sheets.
● Impact on Centralized Platforms and Leverage Businesses: If credit purchases are significantly tightened, centralized exchanges and fiat on-ramps within the UK will be the first to bear the brunt, needing to make deep adjustments in payment channels, risk control strategies, and product design. Crypto lending platforms and service providers offering leveraged products will also need to reassess their business and credit payment system interfaces to avoid being seen as providing "credit leverage" products through regulatory loopholes, potentially resulting in an overall compression of leverage levels and a shift in business structure towards "full margin."
● Implicit Constraints of DeFi's "Spend First, Repay Later" Model: On the surface, on-chain DeFi does not directly interact with the banking system's credit cards and consumer loans, but in reality, many users obtain funds through centralized credit tools and then import them on-chain for collateral, cyclical lending, and high leverage. Restricting credit purchases effectively puts a valve at the starting point of this funding pipeline, making it more difficult for "overdrafting before going on-chain" practices to scale and comply, potentially forcing the DeFi ecosystem's TVL and high-risk strategies to revert to more reliance on "own funds" under regulatory pressure.
● The Gray Area Dilemma of Leverage Regulation: The truly tricky issue is whether regulators have the ability and willingness to distinguish between "responsible leverage use" and "systemic over-leveraging." For some professional investors or high-net-worth clients, using credit tools for allocation after full disclosure and risk assessment does not necessarily constitute systemic risk. However, a one-size-fits-all restriction is easier to enforce, while nuanced differentiation requires more complex identity recognition, data penetration, and dynamic monitoring, and the ultimate scale the UK will adopt will directly determine its friendliness towards advanced strategies and professional funds.
Quantum Security Alerts and the Narrative Overlap of Asset Migration
● Rising Interest in Quantum Security: As the new regulatory rules draw attention, Vance Spencer, a partner at Framework Ventures, raised the point that "if the status quo is maintained, ETH will become the only crypto asset with quantum security," elevating the narrative of quantum computing threats and asset security to a new height. Although such statements carry obvious bias, they objectively reinforce market expectations that "technical security thresholds will reshape the ranking of leading assets."
● Dual Narratives of Technology and Compliance Competing for Position: In a context where regulatory tightening and security anxiety coexist, leading public chains are attempting to solidify their positions through two main lines: one is to tell a compelling story of "technical security" through stronger cryptographic resistance, upgrade paths, and developer ecosystems; the other is to actively engage in dialogue with regulators in various countries, exploring compliant issuance, on-chain identity, and audit-friendly solutions, telling a story of "compliance friendliness." For projects hoping to enter highly regulated markets like the UK, a single narrative is no longer sufficient to form a competitive moat.
● Intersection of the UK Path and the Ethereum Ecosystem: From the current publicly available information, the FCA's regulatory framework focuses more on behavior and structure rather than directly naming a single public chain, but Ethereum's first-mover advantage in compliance exploration remains evident, including ongoing attempts at institutional-grade custody, on-chain compliance tools, and the issuance of regulated assets. Compared to assets with complex technical routes, highly decentralized governance structures, or strong anonymity, this "understandable and accessible to regulators" form has a better chance of obtaining a de facto "regulatory friendly" label in the UK.
● Potential for Pricing Differentiation and Capital Migration: When the narratives of "quantum security" and "compliance labels" converge, there may be new differentiation in asset valuation premiums. Some assets may become the preferred choice for institutions and compliant funds due to clear technical security routes and smooth regulatory connections; others may be forced to rely more on high-risk preference funds due to their inability to provide verifiable security commitments or unwillingness to compromise on compliance. The advancement of the UK's new regulations is likely to accelerate this process of capital and narrative migration.
Solana's Capital Surge: A High-Frequency Testing Ground on the Eve of Regulation
● $1.3 Billion Inflow and Risk Appetite: Research data shows that the Solana ecosystem has recently seen a net inflow of approximately $1.3 billion in stablecoins, which stands out particularly against the backdrop of rising regulatory expectations in the overall market. This data not only reflects the capital's preference for high-performance public chains and their DeFi ecosystems but also indicates that the market is still willing to bear significant risks for high returns and high-frequency strategies in the short term, providing a stark contrast to the narrative of "regulation is about to tighten."
● Motivations for Increased Active Capital: For many traders and institutions, the window period before the rules are fully implemented is the best time to deploy and experiment with strategies using existing gaps. Solana, with its high throughput, low costs, and active DeFi protocols, has become a natural risk testing ground, with capital increasing exposure before the regulatory boots hit the ground, betting on short-term returns while also preemptively positioning itself in the potential "next-generation infrastructure" narrative.
● Compliance Pressure Under the UK's New Regulations: Once the FCA's new regulations are implemented, ecosystems like Solana, which have high on-chain activity and are filled with high-leverage strategies and complex derivatives, are likely to face more intensive compliance inquiries in the UK market. Service providers within the UK that offer Solana-related products will need to align with local requirements on information disclosure, suitability management, and leverage restrictions, which may push some on-chain strategies back into the gray area of "purely on-chain, non-UK regulatory coverage," geographically severing liquidity.
● The Game Between Regulatory Expectations and Profit-Seeking Capital: The current surge of capital into Solana can be interpreted as "the last hurrah before regulation," or as an act of "preemptively positioning potential winners before compliance." If major jurisdictions like the UK ultimately choose to establish some form of cooperation and access mechanism with these high-performance public chains, early entrants may reap considerable rewards; if the regulatory stance is more stringent and the restrictions exceed expectations, this capital may face the risk of being forced to exit or shift to more opaque arenas.
Countdown to September: Shaping the UK Crypto License and Global Regulatory Model
The FCA has advanced the regulatory framework to the final consultation stage and has clearly stated that it will open the licensing application for crypto service providers in September 2026, indicating that the UK crypto industry is entering a countdown to a structural reshuffle. In this reshuffle, on one hand, institutions willing to invest resources in building compliance capabilities and establishing long-term dialogue mechanisms with regulators are expected to grow stronger and become the main connectors for the UK market and broader European capital; on the other hand, local startups and high-risk innovations may be forced to relocate or retreat to purely on-chain scenarios, continuing to experiment in the margins, while the overall DeFi faces the difficult choice of either evolving into a "regulatable form" or being marginalized. In the coming months, the market needs to pay close attention to how consultation feedback is incorporated into the final text, which statements are softened or strengthened, and remain vigilant against excessive speculation on the yet-to-be-published technical details to avoid making erroneous strategic judgments under information asymmetry. Overall, the UK should be viewed as a new model observation point for global crypto regulation—it may prove that "protection and innovation can coexist in a high-difficulty balance," or it may become a cautionary tale of excessive intervention suppressing innovation, and this tightrope-walking attempt has only just begun.
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