From Sandboxes to AI Labs: How the FCA Is Rewriting Crypto’s Future in the UK

6 May, 2025

Digital assets—from cryptocurrencies to tokenised products—are transforming the financial landscape, presenting both unprecedented opportunities and novel challenges. As markets innovate at pace, regulatory frameworks must evolve to safeguard consumers, ensure market integrity, and support sustainable growth. In a speech delivered at TheCityUK International Conference on 24 April 2025, Jessica Rusu, FCA Chief Data, Information and Intelligence Officer, set out the UK regulator’s vision for an outcomes-focused approach to digital asset oversight.

Balancing Innovation and Stability

Rusu emphasised that the UK’s financial centre thrives on clarity and proportionality. By leveraging the existing Financial Services and Markets Act 2000, the FCA adapts proven regulatory tools to digital asset activities rather than crafting a separate rulebook. This building-block strategy allows swift application of conduct, prudential, and anti-money laundering standards while retaining flexibility to respond to market developments.

Fostering Growth Through Regulatory Sandboxes

To accelerate innovation without compromising oversight, the FCA pioneered its Regulatory Sandbox, inviting firms to trial new business models under tailored supervision. Building on its success—where over 60 distributed-ledger technology projects have benefited—the regulator has established a permanent Digital Sandbox offering synthetic data and test environments. Complementing this, the recently launched AI Lab enables firms to explore generative AI applications under FCA guidance, ensuring that breakthroughs in machine learning enhance, rather than undermine, financial stability.

Protecting Consumers in a Complex Market

Retail participation in digital assets is rising globally, yet the sector remains vulnerable to fraud and misinformation. The FCA has introduced a bespoke financial promotion regime for crypto assets, mandating clear communications and banning misleading advertisements. Enforcement teams have moved decisively: within a year, they shut hundreds of illicit websites and issued thousands of alerts to warn investors of emerging scams. By denying authorisation to firms lacking robust governance, the FCA ensures that only operators with firm risk-management frameworks can serve UK consumers.

Shaping International Standards

Recognising the borderless nature of digital assets, the FCA plays an active role in bodies such as IOSCO, the Financial Stability Board, and the FATF. Through these forums, the UK contributes to harmonised principles for custody, market surveillance, and cross-border data sharing. Initiatives like the BIS’s “Project Aperta” exemplify global cooperation on secure, efficient information exchange—critical for monitoring systemic risks and curbing illicit finance.

Streamlining Wholesale Markets

Beyond consumer markets, the FCA is simplifying rules for wholesale participants. Capital requirements have been trimmed, new listing regimes introduced, and private share listings facilitated through the PISCES platform. A unified pre-application support service (PASS) and the digital “My FCA” portal reduce administrative complexity, allowing firms in payments, wholesale, and crypto to focus on product development rather than paperwork.

Looking Ahead: A Dynamic Framework

The FCA’s outcomes-based philosophy demonstrates that robust oversight and market dynamism can coexist. By applying established legislation, enhancing supervisory tools, and engaging globally, the UK is crafting a regulatory ecosystem that encourages innovation, protects participants, and attracts international investment. As digital assets mature, this adaptive framework will be crucial for embedding trust, maintaining stability, and realizing the sector’s full economic potential.