Exchanges are the front door of the crypto market. They’re where most people buy, sell and trade — and they’re where the most high-profile failures have happened. The FCA knows this, and exchange operators applying for authorisation through the September 2026 gateway should expect a higher level of scrutiny than almost any other applicant category.
What the FCA Will Focus On
Market integrity and fair dealing. The FCA will want to know how you prevent market manipulation, wash trading and insider dealing on your platform. If you don’t have surveillance tools and procedures that can detect and respond to suspicious trading patterns, that’s a problem. “We’re too small for that” is not an answer the FCA accepts.
Order execution and transparency. How are orders matched? What’s your pricing methodology? Are there conflicts between your role as platform operator and any proprietary trading activity? The FCA expects clear rules on order handling and execution, disclosed to clients before they trade.
Client asset protection. If you hold client funds or crypto on your platform — and most exchanges do — you’re providing custody. That triggers the full set of custody requirements: segregation, reconciliation, key management, wind-down planning. This is where applications get heavy.
Listing and delisting policies. Which tokens do you list and why? The FCA will want a documented process for assessing tokens before listing, including due diligence on the token’s purpose, team, technology and legal status. You also need clear criteria for delisting and a process for handling it without disadvantaging clients.
AML and financial crime. Exchange platforms handle high volumes of transactions across wallets, chains and jurisdictions. Your AML framework needs to be built for that — blockchain analytics, wallet screening, travel rule compliance and robust transaction monitoring. Generic AML policies written for traditional finance will not pass FCA scrutiny.
The Common Pitfall
Many exchange operators assume that technology and liquidity are what the FCA cares about. They’re not. The FCA cares about whether your exchange is safe for the people who use it. That means governance, controls and consumer protection come first. A technically brilliant platform with weak compliance will not get authorised. A solid compliance framework with average technology will.
Start the Conversation
LHI Consulting helps exchange operators build the governance, compliance and client protection frameworks the FCA expects to see. We know what good looks like because we’ve been doing this for 25+ years.
| Want to talk this through? We offer a free 30-minute consultation to help you understand what the FCA will expect from your firm.
Email: rm@lhiconsult.com | Web: lhiconsult.com |
This article is for general information purposes only and does not constitute legal or regulatory advice. LHI Consulting is a trading style of LHI Holdings Ltd, registered in England and Wales, No. 11496647
