Nikhil Rathi: The FCA CEO Building the UK's Post-Brexit Crypto Framework

Nikhil Rathi arrived at the FCA in October 2020, six months before the UK’s post-Brexit regulatory independence was complete. His mandate was, in effect, to rebuild the UK’s financial regulatory architecture from scratch — not literally, since most EU-derived rules had been onshored into UK law, but institutionally. What would the UK’s approach to financial regulation be in a world where it was no longer a member of the EU single market?

Crypto regulation crystallised this question. The UK could follow MiCA closely — maintaining alignment with Europe for practical interoperability reasons. Or it could diverge deliberately — using its regulatory independence to design a framework that reflected specifically British values and competitive positioning. Rathi navigated this choice pragmatically, choosing principles-based equivalence rather than technical alignment.

Career: Goldman, LSE, Treasury, FCA

Rathi’s background spans the institutions that shape UK financial markets. Goldman Sachs investment banking in London. The London Stock Exchange, where he rose to Director of Capital Markets and eventually became CEO of the International Development arm. Then HM Treasury, as Director of Financial Services — the senior official responsible for UK financial regulation policy during a critical period that included Brexit financial services negotiations.

His Treasury role gave him direct experience with the political economy of financial regulation: how policy is made, how regulatory agencies interact with ministers, and what pressures regulators face from industry and consumer groups simultaneously. This institutional knowledge has been apparent in his FCA leadership — he understands both the regulatory craft and the political context in which it operates.

At the FCA, he inherited an agency that had been substantially reformed following a series of regulatory failures — the London Capital & Finance scandal, weaknesses in authorization processes, and criticism of its response speed. His early tenure focused on FCA organisational reform — improving data capabilities, streamlining authorisation processes, and clarifying the FCA’s own strategic priorities.

The FCA’s Crypto Regulatory Journey

The FCA’s crypto regulatory journey under Rathi has proceeded through distinct phases, each building on the previous.

Phase one was AML registration. The UK implemented the EU’s Fifth Anti-Money Laundering Directive requirements through the Money Laundering Regulations, requiring all crypto asset service providers serving UK customers to register with the FCA for AML/CTF purposes. This was not a comprehensive regulatory framework — it addressed only financial crime risk — but it established the FCA’s initial foothold in crypto supervision and produced the first wave of fitness-and-propriety assessments of crypto firms. The registration process was notoriously challenging: a significant majority of applicants withdrew their applications rather than meet FCA standards.

Phase two was the financial promotion regime, which came into force in October 2023. This required all crypto asset promotions to UK consumers to be either issued by an FCA-authorized firm or approved by one, imposing the same standards — clear, fair and not misleading — that apply to financial promotions for securities and other regulated investments. The financial promotion rules addressed one of the most documented consumer harms: misleading marketing that created unrealistic expectations about crypto returns.

Phase three is the comprehensive FSMA-based regulatory framework — treating the most significant crypto activities as regulated activities under the Financial Services and Markets Act. The framework was published in December 2025, with a go-live date of October 25, 2027. The 22-month implementation period reflects the complexity of bringing an entire industry into a comprehensive regulatory framework — firms need time to apply for authorisation, adapt their systems, and meet new capital and conduct requirements.

Principles-Based and Internationally Coordinated

Rathi’s approach to UK crypto regulation can be characterised as deliberately principles-based. Rather than prescribing specific technical requirements — detailed custody ratios, specific reserve asset classifications — the FCA framework emphasises outcomes: firms must protect customer assets, maintain adequate capital, manage conflicts of interest, and treat customers fairly. The specific means by which firms achieve these outcomes has more flexibility than MiCA’s prescriptive approach.

This principles-based approach reflects the FCA’s broader regulatory culture but also a deliberate choice about the pace of crypto market development. Prescriptive rules that are calibrated for today’s market structure may be inappropriate for tomorrow’s; principles that articulate what the regulator cares about provide guidance without freezing the framework to current market realities.

International coordination has been a consistent feature of Rathi’s approach. The FCA has been an active participant in IOSCO’s crypto work — helping develop the international standards for crypto asset regulation that were published in 2023 — and in the FSB’s framework development. This coordination serves multiple purposes: it gives UK frameworks credibility as consistent with international standards rather than idiosyncratic, it reduces the likelihood of significant regulatory arbitrage between the UK and other major jurisdictions, and it gives the FCA early sight of emerging international requirements.

Post-Brexit: Equivalent but Distinct

The UK’s relationship with MiCA has been one of the most interesting regulatory design choices in Rathi’s tenure. The UK chose not to adopt MiCA — that option was not available post-Brexit, since MiCA is EU legislation. But it also chose not to design a framework that was maximally different from MiCA, which would have created unnecessary barriers for firms operating in both markets.

The result is UK regulation that addresses the same categories of crypto activity as MiCA — stablecoin issuance, crypto exchange operation, custody, brokerage — through frameworks that reflect similar policy objectives but different institutional design. UK stablecoin regulation sits under the Bank of England for systemic firms and the FCA for non-systemic ones; MiCA gives EBA the lead on e-money tokens. UK crypto exchange regulation under FSMA uses the FCA’s existing authorisation framework; MiCA created a new CASP category.

For firms serving both EU and UK markets, this creates dual regulatory compliance obligations. Rathi has been frank that this is a cost of Brexit — the single regulatory passport that allowed UK-authorised firms to serve EU customers without separate EU authorisation no longer exists. The UK’s framework is designed to be high quality enough that it supports a London crypto market with its own depth and liquidity, rather than depending on EU market access.

Consumer Protection and Innovation Tension

Rathi has consistently articulated the need to balance consumer protection with innovation facilitation — the standard regulatory formulation for this tension. What distinguishes his application of the formulation is a willingness to let the balance shift as evidence accumulates.

The financial promotion rules of October 2023 were introduced with specific evidence: FCA consumer research showing that retail investors were systematically misunderstanding crypto risk, partly due to misleading marketing. The evidence drove the rule. The comprehensive FSMA framework’s October 2027 go-live reflects an assessment that the industry needs more time to comply than the FCA initially anticipated — a calibration adjustment based on practical implementation experience.

This evidence-responsive approach — adjusting regulatory design based on what outcomes data shows — is the practical form of the innovation-protection balance. Whether UK crypto regulation under Rathi ultimately produces better consumer outcomes than MiCA or the US framework will be assessable in several years, when post-2027 implementation data becomes available.