“As it uses existing rules, it’s going to be much less like a standalone framework,” Lightstone said. “A crypto firm will be treated like any normal traditional financial institution,” adding that “it will still be hard to get FCA authorization.”

For established banks and investment firms already operating under those rules, adapting to crypto may be relatively straightforward. For newer crypto businesses, however, the cost of building governance, capital and custody systems from scratch could prove considerably more burdensome.

That challenge is particularly evident in the FCA’s proposed client asset regime, applying the Clients Asset Sourcebook (CASS) framework, which would require firms to segregate customer crypto assets from…