By CRYPTOVERSE Legal Consultancy
Customers accept the terms, but misunderstand the service
A crypto company is preparing to launch a UK retail service.
Its onboarding journey contains risk warnings, detailed terms and a checkbox confirming that customers understand the product.
The team considers the customer protection work complete.
Then it tests the journey with prospective users.
Several believe that “FCA-authorised” means their cryptoassets cannot lose value. Others assume withdrawals will always be immediate. Some cannot explain the difference between holding assets in custody and lending those assets to earn a return.
The disclosures exist. The intended understanding does not.
That gap matters when preparing for the FCA’s Consumer Duty.
Does Consumer Duty apply to UK crypto services?
Under the FCA’s final policy for the expanded crypto regime, Consumer Duty applies to in-scope retail crypto business, subject to the relevant application provisions and specific exclusions. Firms must assess their activities, customers and role in delivering outcomes.
PS26/13 confirms the approach, supported by crypto-specific guidance in FG26/5. The framework operates through Principle 12 and PRIN 2A, alongside applicable crypto sector rules. These are final policy materials for the new regime; firms must distinguish their future obligations from those already applicable to their current business. fca.org.uk
MLR registration alone should not be treated as proof that the full Consumer Duty already applies across every crypto service. Equally, an existing authorised firm should assess its current obligations, including relevant financial promotion activities.
For application preparation, the central question is:
How will the firm establish that its retail customers receive good outcomes in practice?
Start with a precise scope assessment
A useful assessment identifies:
- The legal entity providing each service.
- The regulated and ancillary activities involved.
- The relevant customer classification.
- The territorial application of the rules.
- The firm’s role as manufacturer, distributor or both.
- Any specific exclusion and its boundaries.
FG26/5 explains that responsibility depends on the firm’s actual role and influence over retail outcomes. An absence of direct customer contact does not automatically remove responsibilities within a distribution chain. fca.org.uk
Contractual descriptions should therefore match operational reality.
For example, a company describing itself as a “technology provider” may still control product design, fees or distribution decisions. Those functions need legal assessment.
Trading platforms have a narrow exemption
The final policy disapplies the Duty to trading between participants on a UK qualifying cryptoasset trading platform, through PRIN 3.1.1.14R.
The exemption does not cover the platform’s entire relationship with retail users. Other interactions, including onboarding, communications and customer service, remain relevant.
Public offers and admissions require separate analysis
The final policy distinguishes designated public offer and admission activities involving UK-issued qualifying stablecoins from those involving other qualifying cryptoassets.
Consumer Duty applies to the former; the latter designated activities are excluded from retail market business for this purpose. Other services require their own assessment. fca.org.uk
These distinctions make an activity-by-activity analysis essential.
Apply the three cross-cutting obligations
The Duty requires firms to:
- Act in good faith towards retail customers.
- Avoid causing foreseeable harm to retail customers.
- Enable and support customers to pursue their financial objectives.
These obligations appear in PRIN 2A.2 and inform the four customer outcomes.
For practical preparation, examine decisions that could create avoidable harm: misleading labels, opaque charges, confusing asset rights or unnecessary barriers to withdrawal.
The Duty does not guarantee investment returns. PRIN 2A.2 recognises inherent product risks and the significance of customers understanding and accepting them. A firm must still assess harm arising from its own conduct or service arrangements.
Outcome 1: products and services
PRIN 2A.3 addresses product design, target markets and distribution arrangements, with different responsibilities for manufacturers and distributors.
A practical crypto product assessment should explain who the service is intended for and why its features meet that group’s needs.
“Anyone interested in crypto” gives little direction to product design or distribution.
Our recommended review questions include:
- What knowledge does a customer need to use the service?
- What happens when they need access to their assets?
- Are there lockups, withdrawal queues or transfer restrictions?
- Which customers are unlikely to benefit from the service?
- Could interface design encourage decisions inconsistent with the target market?
- How will the firm identify distribution outside its intended market?
A staking service, for example, should assess how its withdrawal arrangements interact with customers’ need for liquidity.
A product assessment should also distinguish the token from the service provided around it. Custody, lending and trading access can create different customer rights and risks.
Outcome 2: price and value
Under PRIN 2A.4, fair value concerns the relationship between the overall price paid and the benefits reasonably expected. Manufacturers and distributors have distinct assessment responsibilities. Disclosure of a charge does not, by itself, establish fair value.
For practical analysis, map the customer’s total cost:
| Cost component | Question to examine |
| Trading fees | What does the customer pay across a typical usage pattern? |
| Spreads | Can customers distinguish the execution price from the reference price? |
| Custody charges | What service and protection does the charge support? |
| Withdrawal fees | How do charges affect customers with smaller balances? |
| Staking deductions | Which amounts are retained before rewards reach customers? |
| Conversion charges | Are costs accumulated across several transaction stages? |
We recommend testing different customer groups and usage patterns. An arrangement may produce a different result for a frequent trader, an occasional buyer and a customer withdrawing a small balance.
Avoid relying solely on competitor pricing. Explain the benefits, limitations and total customer cost of your own service.
Outcome 3: consumer understanding
PRIN 2A.5.3R requires communications that meet customers’ information needs, are likely to be understood and support timely, properly informed decisions.
For crypto firms, we recommend testing whether customers understand:
- Their legal rights over assets.
- Whether assets remain in custody or are used in another arrangement.
- Relevant withdrawal limitations.
- How fees and rewards are calculated.
- The effect of sending assets to an incorrect address.
- What regulatory status does—and does not—mean.
A customer’s acceptance of terms is useful evidence of acceptance. It provides limited evidence of comprehension.
Testing could include questions about a key feature, observed customer journeys or interviews with representative users. Record what confused people and how the firm changed the communication.
Financial promotion compliance also requires its own assessment. A compliant warning should fit within a customer journey that supports understanding.
Outcome 4: consumer support
PRIN 2A.6 addresses support that meets customer needs and avoids unreasonable barriers to using products, obtaining help or exiting arrangements.
Our practical recommendation is to test support at the moments when customers are most likely to need it:
- A withdrawal remains pending.
- Access to an account is lost.
- A customer suspects fraud.
- A staking exit takes longer than expected.
- A complaint concerns an unexplained balance.
- A customer needs assistance because of a vulnerable circumstance.
Measure the complete resolution process. A fast automated acknowledgement can coexist with a lengthy unresolved problem.
Support design should also consider whether customers can reach someone capable of dealing with complex issues. Escalation arrangements need sufficient authority and resources.
Demonstrate outcomes through evidence
A policy should lead to observable controls and management decisions.
For application preparation, we recommend organising evidence around the four outcomes:
| Outcome | Useful evidence |
| Products and services | Target market assessment, product approval records and distribution review |
| Price and value | Total cost analysis, benefit assessment and pricing decisions |
| Consumer understanding | Tested communications, findings and resulting changes |
| Consumer support | Journey testing, resolution data and escalation arrangements |
The appropriate evidence will depend on the firm’s role and maturity.
A startup can use pre-launch testing and a defined monitoring framework. An established business should examine available customer experience and operational data.
Avoid presenting measures such as account growth or customer satisfaction as complete proof of good outcomes. Consider what those measures may conceal.
Give the board information it can challenge
PRIN 2A.8 requires governing body oversight, including at least an annual review and approval of a report assessing whether the firm delivers good retail customer outcomes.
A practical report should enable management to identify problems and decide what to do.
For example, reporting an average withdrawal time may hide a group of customers facing much longer delays. Complaint totals may overlook repeated unsuccessful attempts to obtain help.
We recommend showing significant customer differences, underlying causes, corrective actions and evidence that improvements worked.
Returning to the opening scenario
The company revises its customer journey after the testing exercise.
It explains regulatory status more clearly, distinguishes custody from lending and places withdrawal limitations where customers make their decision. It then tests the revised journey.
Management also connects the findings to product design, support training and ongoing monitoring.
The company now has evidence of how it identified a potential source of harm and improved the experience.
How CRYPTOVERSE can support your preparation
CRYPTOVERSE is a specialist legal and regulatory firm for UK FCA cryptoasset authorisation support.
We can help assess Consumer Duty application, map responsibilities across your services and distribution arrangements, and connect customer outcome assessments with your application evidence.
Contact CRYPTOVERSE to review whether your proposed UK crypto services demonstrate a clear, practical approach to retail customer outcomes.
FAQs
1. Does Consumer Duty apply to UK crypto services?
Under the FCA’s final policy for the expanded crypto regime, Consumer Duty applies to in-scope retail crypto business, subject to applicable commencement provisions, exclusions, and the firm’s activities. Firms should assess their regulatory status and responsibilities before launching their services.
2. Does Consumer Duty make crypto investing risk-free?
No. Consumer Duty does not eliminate the inherent risks of cryptoasset investments or guarantee returns. It requires firms within scope to act in good faith, avoid causing foreseeable harm, and enable and support retail customers in pursuing their financial objectives.
3. Are all crypto trading platform activities exempt from Consumer Duty?
No. The exemption described in the FCA’s final policy is limited to qualifying participant-to-participant trading on a UK qualifying cryptoasset trading platform. Other activities, such as onboarding, customer communications, and support, require separate assessment.
4. How does Consumer Duty affect fair value assessments for crypto services?
Firms should assess whether the overall price customers pay is reasonable in relation to the benefits they can reasonably expect. This may involve reviewing trading fees, spreads, custody charges, withdrawal fees, staking deductions, and conversion costs, taking account of the firm’s role and applicable requirements.
5. Is a Consumer Duty policy sufficient for FCA crypto authorisation?
No. A policy alone does not demonstrate that a firm delivers good customer outcomes. Applicants should also be able to explain how the requirements apply to their services and provide relevant evidence, such as product assessments, customer communication testing, pricing reviews, support data, and monitoring arrangements.