In this episode, we present an audio version of Bitcoin Policy UK’s response to FCA Consultation Paper CP25/40 on the regulation of cryptoasset activities, originally published on 29 January 2026.

This submission sets out BPUK’s position on how the UK should regulate cryptoassets and, crucially, how it should avoid category errors that treat Bitcoin as interchangeable with issuer-driven tokens.

🔍 Core Argument: Avoid the Category Error

A central theme of the submission is that Bitcoin is not interchangeable with the wider “cryptoasset” sector.

Bitcoin:

• Has no issuer, foundation or controlling entity
• Cannot alter its monetary policy by committee
• Enables peer-to-peer settlement without intermediaries
• Functions as a form of digital commodity money

Many other cryptoassets, by contrast, are issuer-driven products with insider allocation, governance discretion and venture-style backing.

Regulatory design must reflect this distinction.

🧭 The Perimeter Boundary That Matters

BPUK urges the FCA to draw a hard line between:

• Custodial/intermediary activity (where regulation is effective and appropriate), and
• Non-custodial infrastructure such as wallet software, node operators, miners and open-source developers (where firm-style obligations are infeasible or nonsensical).

The framework will succeed or fail based on whether it respects this boundary.

🏛️ Key Policy Themes

The response covers a targeted set of consultation questions, focusing on areas where regulatory design has the greatest impact:

1️⃣ Retail Protection

BPUK supports strong retail protections where harm concentrates:

• Custody failures
• Leverage and lending risks
• Conflicts of interest
• Issuer-driven token promotion cycles

However, it cautions against treating Bitcoin as equivalent to centrally issued tokens when applying restrictions.

2️⃣ Best Execution & Price Source Rules

The paper warns against overly rigid UK-only pricing or execution requirements that could:

• Reduce access to global liquidity
• Worsen spreads for UK consumers
• Fragment markets

Principles-based standards focused on outcomes are preferred.

3️⃣ Conflicts of Interest & PFOF

BPUK strongly supports tighter controls on:

• Internalised trading
• Token listing conflicts
• Payment for order flow (PFOF)

Retail users must not become monetised inventory.

4️⃣ Staking & DeFi

Where a clear controlling person exists, regulation is appropriate.

But “protocol regulation” by default risks:

• Capturing open-source infrastructure
• Imposing unenforceable obligations
• Chilling domestic innovation

Definitions of “control” must focus on custody, discretion, and unilateral power, not vague influence.

5️⃣ Tax & Lending Neutrality

The response also references ongoing tax issues around DeFi lending and staking, arguing that:

• Current tax treatment does not reflect economic substance
• Cryptoasset lending is treated less favourably than traditional securities
• The UK risks falling behind without reform

📄 Read the full written paper here:
👉  Response to FCA Consultation Paper CP25/40

To find out more about Bitcoin Policy UK's work and how you can get involved, visit:

https://bitcoinpolicy.uk/