Luxembourg and the UK are pressing ahead with sweeping changes to how crypto assets are regulated, with updates from both the CSSF and the Financial Conduct Authority (FCA) confirming that digital assets are being absorbed into mainstream financial supervision.
In Luxembourg, the CSSF published Version 7 of its FAQ on digital assets for collective investment vehicles on 4 February 2026, aligning its framework with the EU’s Markets in Crypto-Assets Regulation (MiCAR).
The update brings meaningful clarity for fund managers. UCITS funds may now obtain indirect exposure to digital assets, capped at 10% of net asset value, via eligible transferable securities under MiFID that carry no embedded derivatives. Direct digital asset exposure for UCITS remains prohibited.
For alternative investment funds (AIFs), direct and indirect investment in MiCAR-scoped digital assets is permitted, though retail-facing AIFs face the same 10% cap, Zeidler said. Exceeding that threshold requires prior CSSF approval, and managers must also be alert to potential fund-of-funds authorisation requirements where indirect exposure through target funds surpasses 20% of net asset value.
Across the Channel, the FCA is replacing its current anti-money laundering registration framework with a full FSMA-based authorisation regime.
The new rules will cover digital asset trading platforms, dealing and arranging, custody services and stablecoin issuance. Authorised firms will face obligations spanning conduct of business, senior management accountability, prudential requirements, operational resilience and Consumer Duty. Applications open on 30 September 2026, closing 28 February 2027, with the regime going live on 25 October 2027.
Though operating under different legislative frameworks, both regulators are heading in the same direction: digital assets treated like any other regulated financial product, with retail safeguards, robust governance and full authorisation requirements firmly in place, Zeidler explained.
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