Fair value was introduced as part of the Consumer Duty’s price and value outcome when the Duty came into force in July 2023. Firms were required to assess whether their products and services represent fair value for retail customers — that is, whether the price paid is reasonable relative to the benefit received — and to document that assessment.
Most crypto firms completed that assessment. They mapped their fee structures, compared them to market rates, concluded that their pricing was fair, and filed the document. And for most firms, that is where the exercise ended.
The FCA’s position is that fair value assessment is not a one-time exercise. It is an ongoing obligation. When the FCA reviews fair value assessments as part of its Consumer Duty supervisory work, the most common finding is that the assessment does not reflect the firm’s current pricing, does not meet the evidencing standard the FCA applies, and in some cases has not been revisited since 2023.
What the Price and Value Outcome Requires
The Consumer Duty’s price and value outcome requires firms to ensure that the price a retail customer pays for a product or service is reasonable given the overall benefit the customer receives. The FCA’s guidance identifies several factors relevant to the assessment: the nature of the product and the risks it carries, the benefits provided to the customer, the costs to the firm of providing the product, and the market context.
The outcome is not a requirement that products be cheap. It is a requirement that the price be proportionate to the benefit — and that the firm has assessed this honestly and documented the assessment.
Critically, the assessment must be conducted from the customer’s perspective — not the firm’s commercial perspective. A fee structure that maximises firm revenue at the expense of customer value does not meet the standard, even if it is transparently disclosed.
The Specific Challenge for Crypto Products
Crypto products present specific fair value challenges that generic Consumer Duty frameworks do not adequately address.
Spread-based pricing. Many crypto exchanges and trading platforms earn revenue through the spread — the difference between the buy price and the sell price — rather than explicit transaction fees. From a customer perspective, the cost of the transaction is embedded in the price they pay, not stated separately.
For fair value purposes, the FCA expects the firm to be able to articulate the effective cost of each transaction in spread terms and to assess whether that effective cost is reasonable given the service provided. A firm that cannot quantify what its customers are paying in spread terms cannot demonstrate fair value.
Variable fee structures. Many crypto platforms have fee structures that vary by transaction size, customer tier, product type, or market conditions. Fair value assessment for variable structures requires the firm to assess value across the range of scenarios in which customers will actually be charged — not just at a single illustrative price point.
The volatility context. Crypto products are high-risk, high-volatility assets. A fair value assessment must account for the fact that customers may experience significant losses. The benefit the customer receives is not just the potential upside — it is the access to the market, the execution quality, the custody security, and the customer support. All of these must be weighed against the price paid, including in scenarios where the investment itself performs badly.
Bundled services. Where firms offer bundled services — staking, custody, and trading in a single package — the fair value assessment must address the value of the bundle as a whole, not just each component separately. Customers who pay for a bundle that includes services they do not use are not necessarily receiving fair value, even if each individual component is priced reasonably.
What the FCA Finds When It Reviews Fair Value Assessments
The FCA’s published supervisory findings identify consistent gaps:
The assessment compares to market rates but not to customer benefit. Firms often demonstrate that their pricing is competitive against peer firms without assessing whether the price is reasonable relative to what the customer actually receives. Market rate comparisons are relevant but not sufficient.
The assessment is not evidenced. The conclusion that pricing is fair is stated without the underlying data that supports it. Cost of service data, customer outcome data, complaints data, and market comparison data should all be referenced in a fair value assessment.
The assessment is static. It reflects the firm’s pricing at a particular point in time — typically when it was first written. Pricing changes, market conditions change, and customer outcomes evolve. An assessment that has not been updated since 2023 does not reflect any of these changes.
The assessment covers listed products but not the full commercial model. Some firms assess fair value for their primary products but not for ancillary charges — withdrawal fees, custody fees, inactivity fees, currency conversion fees. The FCA’s price and value outcome applies to the firm’s full commercial model as experienced by the customer.
Worth asking:
When did your firm last update its fair value assessment? Does it reflect your current pricing, including any changes made since 2023? And does it evidence the value customers receive — or just assert that pricing is competitive?
How Often Fair Value Assessments Should Be Reviewed
The FCA does not prescribe a specific review frequency. Its guidance states that assessments should be kept under review and updated when there is a material change to the product, the pricing, or the market context.
In practice, the FCA’s supervisory expectation is that fair value assessments are reviewed at least annually and updated whenever any of the following occur: a fee or pricing change; a material change to the product or service being assessed; a significant change in market pricing for comparable products; or evidence from customer outcomes data that raises questions about whether customers are receiving value.
For crypto firms, where market conditions and competitive dynamics can change rapidly, an annual review cycle may not be sufficient for all products. A tiered approach — with high-risk or high-margin products reviewed more frequently — is consistent with the FCA’s risk-based approach to supervision.
What a Current, Defensible Fair Value Assessment Looks Like
A fair value assessment that would withstand FCA scrutiny in 2026 covers:
Product scope. A clear description of the product or service being assessed, including all associated charges and the circumstances in which they apply — not just the headline fee, but the full cost the customer bears across the lifecycle of the product.
Cost of provision. A documented analysis of what it costs the firm to provide the product or service — demonstrating that the firm has genuinely considered whether the price it charges is reasonable relative to its costs and investment.
Customer benefit analysis. An assessment of what benefit the customer receives — access to the market, execution quality, custody security, customer support, and any additional features. This should be from the customer’s perspective, considering the range of customers who hold the product including those who may experience adverse outcomes.
Market comparison. A comparison of the firm’s pricing to comparable products in the market — specific, identifying the comparable products, the comparison methodology, and the conclusion the firm draws.
Customer outcome evidence. Data from the firm’s outcome monitoring relevant to fair value — complaint rates about pricing, product engagement rates, customer satisfaction data. Where outcome data suggests customers may not be experiencing value, the assessment should address how the firm has responded.
Conclusion and sign-off. A clear conclusion on whether the firm assesses the product as representing fair value for retail customers, the date of the assessment, and senior management sign-off confirming the board’s engagement with it.
Final Thought
Fair value is one of the four Consumer Duty outcomes and one of the FCA’s current supervisory priorities. Firms that completed their fair value assessments in 2023 and have not revisited them since are carrying a Consumer Duty gap that the FCA’s ongoing supervision is designed to find.
The remediation is not complex — but it requires genuine engagement. A fair value assessment that honestly addresses the questions the FCA is asking, is supported by current data, and has been genuinely reviewed by senior management is significantly stronger than one that was produced at implementation and filed.
If you want to review your fair value framework against the FCA’s current expectations, speak to our team.
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We help crypto and fintech firms build and maintain Consumer Duty fair value frameworks that meet the FCA’s current supervisory standard.
Email: info@lhiconsult.com | Phone: +44 203 319 5147 | 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.
FAQs
Does fair value mean our products have to be the cheapest in the market?
No. Fair value does not require firms to offer the lowest price — it requires that the price is reasonable relative to the benefit the customer receives. A firm can charge a premium price and still meet the fair value standard if the premium reflects genuine additional benefit. The assessment must address the price-benefit relationship honestly, not simply demonstrate competitive pricing.
Our pricing is transparent and clearly disclosed. Does that satisfy the fair value requirement?
Transparency is a separate obligation from fair value. A price can be transparently disclosed and still not represent fair value if it is disproportionate to the benefit the customer receives. The FCA’s price and value outcome addresses whether the price is reasonable — not just whether it is visible.
We charge through spread rather than explicit fees. How do we assess fair value for a spread-based model?
The starting point is quantifying the effective cost to the customer in spread terms — the difference between the price the customer pays and the mid-market price for the same asset at the same time. That effective cost should then be compared to market rates for comparable services and assessed against the benefit the customer receives. A firm that cannot quantify its effective spread cost cannot demonstrate fair value.
How do we assess fair value for products where customers may experience significant losses?
The fair value assessment is not a prediction of investment performance — it is an assessment of whether the price is reasonable relative to the service provided. For high-risk investment products, the benefit is the access to the market, execution quality, custody security, and support provided — not the investment return. The assessment should address these elements honestly, including in scenarios where the investment performs badly.
What should we do if our fair value assessment concludes that a product does not represent fair value?
The FCA expects firms to act on fair value findings. Where an assessment concludes that a product does not represent fair value, the firm should either adjust the pricing or product features to address the value gap, or withdraw the product from sale. Continuing to sell a product that the firm’s own fair value assessment has found not to represent fair value is a Consumer Duty breach.