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- The IOTA and Cardano Foundations jointly responded to the UK regulator’s cryptoasset regulation discussion.
- They view the FCA’s rules as fair but worry about treating centralized and decentralized platforms the same.
The IOTA Foundation has teamed up with the International Association for Trusted Blockchain Applications (INATBA) and the Cardano Foundation to deliver a joint response to the UK Financial Conduct Authority’s (FCA) discussion paper on cryptoasset regulation.
The FCA, one of the world’s most influential financial regulators, is currently exploring how to shape a future framework for crypto, and the response from IOTA and its partners reflects a growing shift in the industry, one that prioritizes collaboration and constructive dialogue over resistance.
This partnership builds on IOTA’s membership in INATBA and its shared policy goals with the Cardano Foundation.
Key Recommendations for Regulation
In their response, the group highlights the need for smarter, more balanced approaches rather than broad, one-size-fits-all rules. For example, they recommend distinguishing between custodial and non-custodial staking. Custodial staking, where platforms control users’ assets, poses very different risks compared to non-custodial staking, where users keep full control over their funds.
They also insisted that only custodial services should fall under the proposed regulatory framework, as non-custodial solutions inherently reduce risk for users.
They also advocate for tiered regulation based on the size, structure, and risk profile of a project. This would prevent smaller developer teams and non-custodial builders from being burdened by heavy compliance obligations designed for large, centralized organizations, which could stifle innovation.
On credit usage, the joint response suggests a more balanced approach rather than an outright ban. Centralized lending and borrowing firms should be allowed to offer credit for crypto purchases, but only with proper disclosures, customer risk assessments, and limits on aggressive, credit-fueled marketing campaigns.
Seeing DeFi as a Strength
Another central theme is transparency. Decentralized finance (DeFi), they argue, should be seen as a feature, not a flaw. Unlike traditional finance, DeFi protocols are built for transparency and auditability, giving users a clear view of how systems operate.
With UK crypto awareness already at 95% (according to Adan), they believe retail users are ready to engage responsibly when given the right tools and information.
The report says,
We believe that DeFi is best served through industry-led self-regulation. INATBA’s February 2025 proposal for DeFi self-regulation shows how builders can address risks proactively while preserving space for innovation. This kind of bottom-up approach can help meet safety goals without strangling growth.
The IOTA team used their X thread to remind regulators that the UK’s crypto community, both users and builders, shouldn’t be underestimated. They stressed that crypto is about far more than speculation; it’s about transparency, autonomy, and innovation.
The team framed this regulatory moment as a rare opportunity for the UK to set the tone globally by crafting rules that both protect users and nurture innovation. “This is a chance to get regulation right and lead by example,” they said, encouraging readers to explore their full response to the UK Financial Conduct Authority’s proposals.
