UK Crypto Showdown: FCA's Protective Measures Face Off Against Industry's Drive for Innovation

Arjun Sethi, co-CEO of Kraken, has voiced strong opposition to the UK's tough crypto regulations, arguing that they hinder both retail investor involvement and capital movement. The Financial Conduct Authority (FCA) rolled out new rules for financial promotions in late 2023, mandating exchanges to provide risk disclosures, assess investor suitability, and refrain from encouraging trading, according to a

report. Sethi contends that these requirements add unnecessary obstacles, discouraging people from using crypto services. "If you visit any crypto platform in the UK today, including Kraken, you’ll see warnings similar to those on cigarette packs—basically saying, 'use this and you might die'," he told the Financial Times, as cited in the report. He also pointed out that the 14-step process for transactions damages the user experience, resulting in UK customers missing out on around 75% of the products available to Americans, such as DeFi staking and lending, according to the same report.

The FCA maintains that these regulations are essential to help investors grasp the risks associated with crypto assets. Authorities have also ramped up enforcement, recently taking legal action against HTX (affiliated with Justin Sun) for violating promotion rules, as mentioned in the report. Sethi’s remarks echo wider industry concerns about the UK’s conservative regulatory stance, especially as the U.S., under former President Donald Trump, has indicated a friendlier approach to digital assets, as the report also notes.

Meanwhile,

has opted for a different strategy, launching a regulated savings product in the UK that offers 3.75% interest and is covered by the Financial Services Compensation Scheme (FSCS), according to a article. This offering, provided through ClearBank, enables instant deposits and withdrawals and is insured up to £85,000 ($112,000), as detailed in the article. By doing so, Coinbase is positioning itself as a rival to traditional banks and fintech firms, using its FCA Virtual Asset Service Provider (VASP) license to broaden its reach into mainstream finance, as reported in the article. Keith Grose, CEO of Coinbase UK, highlighted that the product meets local demands and marks a step toward making Coinbase the "top financial app in the UK," according to the article.

These differing approaches underscore the regulatory divergence between the UK and the U.S. Kraken, which may go public as soon as 2026, has concentrated on advocating for clearer regulations, while Coinbase has chosen to comply in order to enter the traditional financial sector. The FCA’s enforcement actions, including a £4.5 million penalty against Coinbase in 2024 for onboarding high-risk clients, illustrate the hurdles crypto companies encounter as they navigate the UK’s changing regulatory environment, as noted in the article.

As the industry seeks to balance investor safety with innovation, Sethi’s criticism and Coinbase’s growth highlight a crucial turning point for crypto adoption in the UK. With global markets facing pressure and regulatory oversight increasing, how companies adjust to these rules will determine the future integration of digital assets.