FCA Registration and FSCS: UK Crypto Protection Limits

FCA cryptoasset registration is AML supervision only. It is not the same as being authorised to offer regulated investments, and it does not give consumers compensation or ombudsman rights by itself.

Spot crypto like Bitcoin or Ether is generally unregulated. FSCS does not cover it. FOS can investigate complaints about UK regulated firms, such as banks, but it usually cannot look into an unregulated crypto exchange's core services.

Crypto derivatives such as CFDs are regulated products. FCA, FOS and FSCS frameworks can apply to those activities when provided by authorised firms.

Most spot crypto trading is unregulated in the UK. Crypto exchanges and custodians that operate in or from the UK must register with the Financial Conduct Authority for AML supervision. Registration is not a seal of approval on their products or safety. It is a status confirming the firm is within scope of the Money Laundering Regulations and is monitored for financial crime controls.

FSCS is the statutory compensation scheme for customers of failed firms carrying out regulated activities. Because spot crypto is generally not a regulated investment, FSCS cover does not usually apply to it. The Financial Ombudsman Service resolves complaints about regulated firms. It often handles disputes around banks' treatment of payments connected to crypto, yet it typically cannot consider complaints about an overseas or unregulated crypto exchange's custody or trading service.

FCA cryptoasset registration sits under the UK Money Laundering Regulations. Firms apply for registration so the FCA can supervise their AML and CTF controls. The FCA sets out the process on its guidance page for cryptoassets registration applications. It emphasises this is not an authorisation to conduct regulated activities under the Financial Services and Markets Act.

Exchange providers and custodian wallet providers are explicitly in scope. Carrying on such a business in the UK without registration can be a criminal offence under the MLRs. The FCA has also warned registered firms not to imply registration is an endorsement or that it brings consumer protections such as FSCS or FOS cover.

FSCS protects customers of authorised firms when specified regulated products or activities fail. Most spot cryptoassets are not regulated products, so FSCS does not protect them. This position is set out in FSCS guidance for consumers looking at cryptocurrencies.

There is an important distinction for derivatives. Crypto CFDs and similar crypto derivatives are regulated products. When a firm offers those products under FCA authorisation, the usual complaint and compensation frameworks can apply to that activity. The FCA's consumer warning on cryptocurrency CFDs confirms their status as regulated investments.