Dealing as principal means an entity trades financial instruments using its own capital and on its own account. In this capacity, the firm assumes direct market risk for its positions, profiting from price movements or providing liquidity to clients. This contrasts with acting as an agent, where a firm executes trades on behalf of clients without taking proprietary risk. Within digital asset markets, this activity is common among market makers and proprietary trading firms.
Context
In the digital asset trading landscape, dealing as principal is a prevalent operational model for many exchanges and over-the-counter (OTC) desks. Regulatory bodies increasingly scrutinize these activities to ensure market fairness, transparency, and consumer protection. Future policy discussions will likely focus on establishing clear distinctions between principal and agency trading to prevent conflicts of interest and reduce market manipulation risks.
The FCA's consultation integrates digital asset service providers into the full regulatory perimeter, mandating alignment with Principles of Business and Consumer Duty standards.
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