Your guide to this week in regulation

A warm welcome to our readers as we provide our first weekly regulatory update for 2026. The year ahead (perhaps like no other before it) promises an extensive array of major regulatory developments that we aim to help you navigate and decipher.

Such was the uptick in publications before the end of the year, this week we take the opportunity to take stock of some of these key developments, which include three consultations as part of the Financial Conduct Authority’s (FCA) broader crypto ‘roadmap’ roll-out, engagement to explore possible approaches to setting market risk capital requirements, and key priorities to reform the mortgage market.

In somewhat lighter reading, we also highlight the guidance covering minimum standards of behaviour for financial services employees.

All of the above (and more) is usefully brought together in the latest version of the Regulatory Initiatives Grid.

FCA seeks feedback on crypto regulation

The FCA is seeking feedback on proposals for the UK’s crypto regulatory framework, marking the next step in creating an open, sustainable, and trustworthy market. The aim is to balance innovation with consumer protection, ensuring investors understand risks without eliminating them entirely. The proposals adopt principles similar to traditional finance: clear disclosures, proportionate requirements, and flexibility for innovation.

Key areas under consultation include:

• Admissions and disclosures: Rules for listing cryptoassets and informing investors.
• Market abuse: Measures to prevent insider trading and manipulation.
• Trading platforms and intermediaries: Standards for exchanges and brokers.
• Staking, lending, and borrowing: Transparency on risks and protection
• Decentralised finance (DeFi): Considering applying traditional finance rules.
• Prudential requirements: Financial safeguards for firms.

These proposals align with recent government legislation and build on prior feedback and research. While regulation is coming, the FCA emphasises that crypto remains largely unregulated except for financial promotions and crime prevention. Responses are invited until 12 February 2026 via consultation papers CP25/40, CP25/41, and CP25/42. The regulator will continue to support firms through resources, webinars, and pre-application guidance under Money Laundering Regulations.

Read more on FCA seeks feedback on proposals for UK crypto rules

Bespoke Market Risk Rules: FCA engagement paper

The FCA is seeking feedback on whether bespoke market risk rules for non-bank trading firms could reduce barriers, free up capital, and attract new participants to support economic growth. The current rules were originally designed for banks to ensure they held enough capital to absorb major trading losses and protect depositors. This approach also applies to non-bank trading firms, despite the risk of potential harm from their failure being arguably lower. This alignment can impose significant burdens on non-bank firms, limiting liquidity provision.

The FCA aims to ensure its framework remains proportionate, protects market integrity, and fosters sustainable growth. Its engagement paper explores reform options to boost liquidity, encourage innovation, and strengthen the UK’s position as a leading financial hub. The discussion will assess the practicality of a customised approach and inform future proposals.

Feedback is open until 10 February 2026, after which a detailed consultation paper will follow in 2026 and a policy statement in 2027. The FCA will engage continuously with industry and host a roundtable in late January 2026. Interested parties can register interest with the FCA and submit questions in advance.

Read more about the FCA's engagement paper on bespoke market risk rules

FCA sets out mortgage market roadmap

The FCA’s Feedback Statement FS25/6 sets out the regulator’s response to feedback on the future of the UK mortgage market, on the back of its Discussion Paper published in June 2025. The statement outlines a roadmap focused on four themes: expanding access for first-time buyers (FTBs) and underserved groups, enhancing later life lending, enabling innovation, and protecting vulnerable consumers.

Key proposals include reforms to high loan-to-income lending, interest-only mortgages, and the use of rental payment data in affordability assessments. The regulator plans to review rules affecting those with variable and irregular income such as self-employed individuals and contractors, and plans to support customers with cleared adverse credit back to the mortgage market through modernised, outcomes-focused requirements.

For later life lending, a market study is planned to explore more holistic advice models and potential changes to retirement interest-only (RIO) mortgages. Innovation will be supported with a focus on digital journeys and the responsible use of AI. The statement also addresses climate risk, economic abuse, and debt consolidation, emphasising the need for cross-sector collaboration. The FCA stresses the importance of rebalancing risk, accepting some “tolerable harm” to enable broader access, while maintaining strong consumer protections under the Consumer Duty. Consultations and further policy development are planned for 2026–2027.

Read more on the plans to help the build mortgage market of the future

Read more on the FS25/6: Mortgage Rule Review: Feedback to DP25/2 and Roadmap

FCA issues final guidance on misconduct

The FCA has issued final guidance to help financial services firms tackle serious non-financial misconduct, such as bullying, harassment, and violence. This follows a July rule change that clarified standards for addressing such behaviour and aligned requirements for banks and non-banks. The FCA aims to give firms confidence to act, ensure consistency, and make clear when misconduct breaches regulatory rules.

After consulting firms, 95% supported additional guidance. The published guidance explains how firms should apply minimum behaviour standards and assess fitness and propriety for roles. Key updates include new examples and flowcharts, clearer alignment with employment law, and clarification on managers’ accountability based on knowledge and authority. It also confirms firms are not expected to investigate trivial or implausible allegations or breach privacy laws.

While some firms requested more detailed examples, the FCA emphasises that judgement remains essential. The responsibility for preventing and addressing misconduct lies primarily with firms, but these rules and guidance aim to raise standards across the industry. Implementation begins on 1 September 2026, reinforcing trust and integrity in financial services.

Read more on the FCA’s final guidance to tackle serious non-financial misconduct in financial services

Read more on FS25/23: Tackling nonfinancial misconduct in financial services

Regulatory Initiatives Grid: planning ahead

The Financial Services Regulatory Initiatives Forum (FCA, Bank of England, PRA, Payment Systems Regulator, The Pensions Regulator, HM Treasury and others) recently released the latest Regulatory Initiatives Grid, a forward look at scheduled regulatory activity over the next two years in UK financial services.

This edition features 124 live initiatives, a 13% reduction in total live initiatives since the previous edition. 45 initiatives are cross regulator/government initiatives, which has helped to reduce the total number of initiatives featured and minimise duplicative requests of firms.

The grid aims to support the government’s Financial Services Growth and Competitiveness Strategy by focusing on:

1. Financial stability and efficiency: Progress on Basel 3.1, the Strong and Simple framework, Prospectus Regime Reform, and Wholesale Markets Review.

2. Innovation: Working towards a UK stablecoin regime, reforms to UK captives insurance, and a National Payments Vision for world‑leading payment solutions.

3. Consumer confidence and investment: Advice Guidance Boundary Review and Buy Now Pay Later regulatory progress.

By publishing a clear outline of upcoming regulatory activity, the forum intends for firms to plan projects and allocate resources effectively, improving delivery outcomes and in turn consumer confidence. The forum is interested in understanding how useful the initiatives grid is in planning for regulatory changes and welcomes feedback from stakeholders via online survey or email.

Read more on the Regulatory Initiatives Grid