Consultation Response to UK FCA CP25/40: Regulating Cryptoasset Activities

Regulating Cryptoasset Activities.We commend the FCA's proactive and pragmatic approach to establishing a coherent regulatory framework for cryptoasset activities within the UK regulatory perimeter.This comment letter reflects our shared commitment to promoting market integrity and investor protection, while recognising the importance of proportionate regulation that supports responsible innovation and orderly market dynamics.We recognise that cryptoasset markets present distinct structural, technological, and behavioural risks that cannot always be addressed through direct transposition of existing financial services rules.At the same time, we appreciate the FCA's application of the principle of "same risk, same regulatory outcomes," and its approach of anchoring cryptoasset regulation within the broader financial conduct framework, rather than treating it as a separate regime.Consistent with our broader regulatory engagement, we advocate for a holistic approach to policy design -one that is outcomes-focused, technologically informed, and responsive to market maturity.In our view, effective cryptoasset regulation should go beyond disclosure-1 With offices in Charlottesville, VA; New York; Washington, DC; Hong Kong SAR; Mumbai; Beijing; Abu Dhabi; and London, CFA Institute is a global, not-for-profit professional association of more than 190,000 members, as well as 160 member societies around the world.Members include investment analysts, advisers, portfolio managers, and other investment professionals.CFA Institute administers the Chartered Financial Analyst® (CFA®) Program.For more information, visit www.cfainstitute.org or follow us on LinkedIn and X. 2 Founded in 1955, CFA UK is one of the largest member societies of CFA Institute, which serves nearly 12,000 members of the UK investment profession.Many of our members analyse securities, manage investment portfolios, advise on investments, or are in roles responsible for investment operations or oversight.Most of our members have earned the Chartered Financial Analyst® (CFA®) designation.All our members are required to attest to adhere to CFA Institute's Code of Ethics and Standards of Professional Conduct.For more information, visit www.cfauk.orgor follow us on Twitter @cfauk and on LinkedIn.com/company/cfa-uk/ Summary of Key PositionsCryptoasset Trading Platforms • Q1 -We support the requirement for a UK-incorporated legal entity for CATPs serving retail clients.We recommend additional clarification regarding cross-border insolvency treatment, supervisory coordination with home-state regulators, and the threshold for determining substantive UK presence.• Q2 -We support the proposed non-discretionary execution rules and the principles-based approach to algorithmic trading.We recommend the development of crypto-specific guidance addressing blockchain-level operational resilience risks.• Q3 -We support the QCDD gating requirement for retail client access.We recommend that the FCA consider behavioural safeguards designed to mitigate disclosure click-through habituation, particularly in the context of repeat transactions.• Q4 -We do not support permitting principal dealing within the same legal entity as a CATP operator at this stage.The resulting conflicts of interest are structural and cannot be sufficiently mitigated through conduct safeguards alone.We recommend an initial prohibition, with a future thematic review when MAR regime and supervisory capabilities have matured.• Q5 -We support the high-level settlement framework.We recommend further clarification regarding settlement finality, asset segregation during the settlement cycle, and the circumstances under which withdrawal restrictions may be imposed.