The FCA’s New Frontline: Crypto Firms and Algorithmic Traders Under Scrutiny

The UK’s financial regulator, the Financial Conduct Authority (FCA), has made its priorities clear: the next wave of enforcement and supervision will focus on the technologies reshaping markets—crypto assets and algorithmic trading. Recent actions show a decisive shift from consultation and engagement to hands-on enforcement, and the implications for firms are significant.

Crypto: From Experiment to Enforcement

The FCA has been steadily tightening its grip on the crypto sector, and its latest moves mark a step-change. With a new enforcement unit—three permanent staff and twelve secondees—the regulator is expanding its capacity to police crypto firms. This comes at a time when authorisation timelines stretch to an average of 317 days, underlining the depth of scrutiny.

Beyond the long queues for approval, the FCA is also updating guidance around critical risks: capital adequacy, market abuse (including insider trading), and consumer protection standards. In parallel, tax authorities are sharpening their approach, signalling a tougher landscape for both retail investors and firms.

The message is clear: crypto can no longer be treated as an experimental space. Firms operating in this market must demonstrate the same maturity, governance, and controls expected in traditional finance.        

Algorithmic Trading: Governance Under Pressure

At the same time, the FCA’s review of 10 specialist algorithmic trading firms uncovered troubling weaknesses. Too many firms relied on outdated policies, unclear governance structures, and insufficient knowledge of third-party algorithms. Market surveillance was found lacking, raising concerns that risks could go undetected until they crystallise into real harm.

The regulator’s findings make one thing clear: in today’s market, speed of execution is not an excuse for weak compliance. Algorithmic strategies, if poorly governed, can amplify risks across the system. As reforms to capital requirements for non‑retail trading firms advance, the FCA is making it clear that oversight of algorithms is not optional—it is integral to maintaining market integrity.

The Convergence: Code as the New Compliance Frontier

What connects crypto firms and algorithmic traders is that both operate at the intersection of finance and technology. For regulators, that means the real battleground is no longer paperwork, but codework.

Firms are being asked fundamental questions:

• Do you truly understand the technology you deploy?
• Can you evidence how it is controlled, monitored, and governed?
• Are your compliance functions embedded in the code, not just sitting in policies?

The FCA’s approach signals that the future of regulation will converge around digital finance more broadly. Whether it’s crypto, AI-driven strategies, or complex trading algorithms, firms will increasingly be held accountable for how technology underpins their business models.

Practical Takeaways for Compliance Leaders

1. Invest in technical literacy – Compliance officers and senior managers must understand the fundamentals of algorithms and blockchain protocols. Governance requires insight, not just oversight.
2. Governance must be live, not static – Policies updated once a year are no longer sufficient. Firms need dynamic controls that evolve alongside the technology.
3. Third-party risk is non-transferable – Outsourcing algorithms or relying on external providers does not shift regulatory responsibility. Firms remain accountable.
4. Prepare for convergence – The FCA’s trajectory suggests a future where oversight of crypto, AI, and trading tech merges into a broader digital finance supervisory framework.

Closing Thought

The FCA’s recent actions send a clear message: in the era of digital finance, compliance is as much about code as it is about conduct. Those who embed governance within their technology will be best positioned to thrive. Those who see compliance as an afterthought risk not only regulatory action but exclusion from the UK market altogether.        

👉 Do you think the FCA is moving fast enough—or too cautiously—in bringing crypto and algorithmic trading under tighter control?