Crypto Under The Microscope
How FCA’s DP25/1 Sets the Stage for Stricter Compliance
As part of its expanding crypto regulatory roadmap, the UK’s Financial Conduct Authority (FCA) released Discussion Paper DP25/1 on 2 May 2025, seeking industry feedback on the future regulation of crypto asset trading platforms (CATPs), intermediaries, and emerging digital finance activities. The paper outlines the FCA’s evolving approach to market integrity, consumer protection, and conduct standards in a sector still largely operating outside traditional financial rules.
Backed by new statutory powers introduced by the UK Treasury, this discussion paper reflects months of public and private sector engagement and aligns closely with the FCA’s 2025–2030 strategic priorities. These include delivering smarter regulation, supporting economic growth, and strengthening safeguards against financial crime and market abuse. Notably, DP25/1 focuses squarely on preventing insider dealing and addressing conflicts of interest—core compliance challenges that crypto markets must urgently address as they scale.
Insider Dealing in Crypto: A Renewed Regulatory Focus
The FCA makes clear that insider trading risks in crypto markets mirror those in traditional finance—but often lack sufficient guardrails. As centralised and decentralised platforms become more interconnected, the misuse of material, nonpublic information (MNPI)—such as early knowledge of token listings or platform changes—poses growing threats to market integrity.
Key areas of concern include:
- Employee misuse of privileged information at CATPs, particularly around upcoming listings or pricing changes
- Order book manipulation and MEV (Maximal Extractable Value) strategies in decentralised systems
- Inadequate surveillance, especially where firms serve multiple roles as platforms, issuers, and counterparties
To address these risks, the FCA proposes enhanced governance requirements, including:
- mandatory functional separation, including governance and system controls, to ensure objective execution practices
- Prohibit proprietary trading on their own platforms
- Avoid structural arrangements that could create or exploit asymmetric information flows, especially during high-risk events like token launches or early access trading
This aligns with StarCompliance’s (Star) view that automated surveillance, trade pre-clearance, and centralised MNPI tracking will become essential for crypto compliance teams—especially as more firms enter hybrid markets involving both digital and traditional assets.
Conflicts of Interest: A Call for Structural Safeguards
Alongside insider risk, conflicts of interest are a critical theme in DP25/1. The FCA is especially concerned about the blurring of roles between crypto platforms, issuers, and intermediaries—a common feature of vertically integrated business models.
Among the proposed actions:
- A blanket ban on Payment for Order Flow (PFOF), citing unmanageable conflicts between brokers and clients
- Increased scrutiny of platform-native tokens, especially when used to incentivise behaviour or collateralise trades
- Stronger controls on self-dealing, including firms trading against client flow or structuring insider-beneficial products
The FCA also encourages regulated firms to adopt governance structures that ensure arm’s-length decision-making, while building compliance capabilities to monitor for internal abuses of information and authority. For compliance leaders, this means implementing real-time flagging of related-party transactions, using automated conflict of interest checks, and ensuring disclosures are maintained and reviewed across departments and geographies.
How Star Can Help Firms Prepare
At Star, we believe the FCA’s approach in DP25/1 sets an important tone for crypto regulation globally. As firms respond to these evolving expectations, they must build compliance frameworks that are not only scalable and agile but also tailored to crypto’s unique risks.
Our Crypto Trading Compliance Software helps firms:
- Monitor and control insider risk through pre-clearance workflows, MNPI flagging, and integrated communication surveillance
- Manage enterprise conflicts of interest using dynamic disclosure tracking, approval routing, and audit-ready reporting
- Automate policy enforcement and training based on employee roles, past activity, and evolving regulatory requirements
With the FCA set to consult on formal rulemaking later this year, now is the time for crypto market participants—and their compliance teams—to assess gaps, prepare systems, and align with a future where market integrity in crypto is non-negotiable.
To learn more about how Star can partner with your firm to advance your employee compliance programme, from employee conflicts of interest to UK-specific needs like the FCA’s guidance on the Senior Managers and Certification Regime (SMCR), schedule a personalized demo here.
Crypto Regulations Decoded
