The Consumer Duty Blind Spot in Cryptoasset Authorisation
What cryptoasset firms should be doing now to prepare for submission.
Existing cryptoasset service providers have until 28 February 2027 to apply to the FCA for Part 4A authorisation within the application window and potentially benefit from the saving provision. Applying after that date could significantly affect a firm's ability to continue operating as usual under the new regime.
Preparing a complete application before the deadline is therefore particularly important.
One interesting feature of the FCA's cryptoasset authorisation application form is that it doesn't expressly request documentation relating to an applicant's Consumer Duty compliance programme.
This raises a few questions. What does the FCA expect applicants to provide? What should a Consumer Duty programme contain? And if the FCA expects this information, why isn't it specifically requested in the application form?
The position is that firms undertaking activities within the scope of the Consumer Duty need to demonstrate how they will comply with it as part of the authorisation process.
In practice, this involves preparing a Consumer Duty compliance programme covering, among other things:
- Target market identification and analysis.
- Product and service governance.
- Fair value assessments.
- Customer understanding assessments and testing.
- Customer support monitoring policies and supporting management information (MI).
- Customer outcomes monitoring.
- Root cause identification and remediation.
The precise arrangements will depend on the firm's products, services and customer base.
Where to start
For cryptoasset firms preparing their applications, I would suggest starting with four questions about each product or service.
Are your products B2B, B2C or a combination of both?
Could they lose all their money? Become trapped in a cycle of debt? Be unable to access their assets? Find themselves locked into a contract they no longer want, paying excessive fees?
If you can answer these questions for each of the products and services forming the basis of your application, you have a starting point for documenting your Consumer Duty compliance programme for FCA submission.
Although the application form doesn't expressly request a Consumer Duty programme, demonstrating compliance with the Duty remains part of preparing for authorisation.