A Financial Ombudsman Service ruling this year has laid bare the limits of UK consumer protection for crypto investors, reminding everyone that FCA registration for crypto exchanges is about anti-money-laundering checks, not safeguarding your coins. The decision, DRN 5822296, is the latest sign that most spot crypto trading sits outside the compensation and complaints systems that cover traditional banking.
What FCA registration actually means
FCA cryptoasset registration is often mistaken for a stamp of approval. It isn't. The registration, done under the Money Laundering Regulations, is for AML and counter-terrorist financing supervision. It does not authorise the firm to carry out regulated investment activities, and it brings no consumer compensation or ombudsman rights.
The FCA has been explicit about this. It warns registered firms not to imply that registration is an endorsement or that it comes with FSCS or FOS cover. Operating without registration can be a criminal offence, but being registered doesn't mean your crypto is protected if the exchange collapses.
Where the safety nets don't reach
The Financial Services Compensation Scheme (FSCS) is the statutory scheme for customers of failed firms doing regulated activities. Spot crypto like Bitcoin or Ether doesn't qualify because those products are unregulated. So if a crypto exchange goes bust holding your coins, FSCS won't pay out.
The Financial Ombudsman Service (FOS) has a similar boundary. It can investigate complaints about UK regulated firms, like banks, but it usually can't consider complaints about the core services of an unregulated crypto exchange. There is an exception: crypto derivatives such as CFDs are regulated products, so FCA, FOS, and FSCS frameworks can apply to those activities. But plain spot trading is outside the net.
The FOS decision that shows the line
The FOS decision DRN 5822296 illustrates exactly where that line sits. FOS can handle disputes about how a bank treated a payment connected to crypto, but it cannot investigate the unregulated crypto service itself. That means if your problem is with the exchange's execution, custody, or fees, the ombudsman likely can't help.
This isn't a new policy, but the ruling is a useful reminder. The gap between what people expect and what the rules actually provide is wide, and the FCA has repeatedly told firms not to blur it.
What this means for investors
For anyone holding spot crypto in the UK, the practical takeaway is blunt: check whether your provider is FCA-registered, but don't mistake that for protection. If the exchange fails or a trade goes wrong, you probably have no recourse to FSCS or FOS. The only regulated crypto products with those safety nets are derivatives like CFDs, and even then the coverage depends on the specific firm and activity.
The FCA's warning to registered firms stands. Registration is a legal requirement, not a badge of trustworthiness. Until the regulatory framework changes, spot crypto investors are largely on their own.
