Although there is no ex-type sequence yet available, the species is relatively morphologically distinct and there is no known evidence of cryptic taxa within the established species concept.

Hygrocybe subpapillata belongs to the European waxcap assemblage whose members are threatened based on the declining area/quality of their grassland habitat. This assemblage is declining across Europe due to changes in land use (agricultural intensification and decline of traditional farming practices) and increasing use of fertilizers and pesticides. Declines in area and quality of available habitat has probably exceeded 30% over the last 50 years; the decline in population size over this time could be higher, but is treated here as proportional to the habitat declines. This decline in habitat is expected to continue even more rapidly over the next 50 years (approximately three generations). This species is assessed as Vulnerable A2ce+3ce+4ce.

Hygrocybe subpapillata is widespread in Europe (Boertmann 2010, GBIF 2024). Our knowledge of its global geographic range is based on knowing the type locality (France), the origins of two publicly-available DNA barcodes (Norway and the UK) and national records based on morphological identifications. Although there is no ex-type sequence yet available, the species is relatively morphologically distinct and there is no known evidence of cryptic taxa within the established species concept. It is regarded as "probably overlooked" in Europe (Boertmann, 2010) and so, although currently one of the rarer waxcaps in Europe, it could prove to be be more widespread. It possibly occurs in Russia. It has been reported as present in Quebec in Canada (Canadian Endangered Species Conservation Council 2022), but this would require confirmation as to whether it is truly conspecific.

The population size could exceed 20,000 mature individuals but exact figures are unknown. GBIF (2024) lists about 500 European records. The population is decreasing in all known occupied European countries, caused by a cessation of small scale farming and traditional methods of grassland management. The eastern boundary of the range is, as is the case for all members of this assemblage, unclear because of lack of data.

According to the Food and Agriculture Organization of the United Nations (FAO), the area of grasslands in the EU declined by 12.8% over 13 years (1990-2003); only a few Member States managed to avoid this trend (Food and Agricultural Organisation of the United Nations 2006). Based on this, the decline is inferred to be at least 30% over 30 years (past, future and ongoing) but may actually approach 50% over three generations for this species (50 years; Dahlberg and Mueller 2011) and even higher over longer time-frames. It is suspected that the rate of population decline in this species will be approximately proportional to the loss of its habitat.

Hygrocybe subpapillata is an indicator of mycologically rich but nutrient-poor, semi-natural grassland (a member of the waxcap grassland assemblage). This habitat, which may be of low conservation concern for its plant and animal diversity, is rapidly disappearing worldwide due to changes in land use (intensification of farming practice, eutrophication and increased use of fertilizers and pesticides). Waxcaps are currently regarded as forming a biotrophic relationship with plants but the details remain unclear. Fruiting populations of waxcaps are nitrogen sensitive and dependent on a regime of grazing or mowing without applications of fertilizer or pesticide. The waxcap grassland assemblage is characterised by a large diversity of other fungal genera (including Entoloma, clavarioid taxa and geoglossoid taxa) that have similar nutrient and management requirements. Addition of fertilizers or cessation of grazing/mowing management is rapidly detrimental to fruiting community diversity.

As a species dependent on semi-natural grasslands, Hygrocybe subpapillata is threatened by habitat loss and degradation due to a decrease in small scale, low intensity farming. The main reasons for decline involve land that is no longer farmed or, if still in the farming system, is subjected to ploughing, reseeding, fertiliser application (mainly of phosphorus and nitrogen), pesticides, reduced grazing intensity and eutrophication. According to NATURA 2000 reports (Calaciura and Spinelli 2008), grassland habitats are steadily decreasing, mainly due to abandonment or change in land use. According to the Food and Agriculture Organization of the United Nations (FAO), the area of grasslands in the EU declined by 12.8% from 1990 to 2003; only a few Member States managed to avoid this trend (Food and Agricultural Organisation of the United Nations 2006). Pressure caused by land use changes on grassland habitats is steadily increasing. Some 60% of newly afforested areas in the EU formerly were used as permanent/seasonal grazing land or hay-production in natural meadows.

More than 75% of the grassland habitats in the EU are in an unfavourable conservation status, according to draft data provided by Member States under Article 17 of the Habitats Directive. According to the European Environment Agency (2015), natural and semi-natural grasslands have undergone a major decline in recent decades. Grasslands have one of the lowest proportions (11%) of favourable condition assessments and one of the highest proportions of decreasing assessments of all the terrestrial ecosystems considered. About 49% of EU assessments for the 45 grassland habitat types of community interest are "unfavourable-bad". Grassland butterflies, for example, are declining severely and there is no sign of levelling off (European Environment Agency 2024). Accordingly, Janssen et al. (2016) reported that 53 % of the grassland habitats in Europe are threatened to some degree (the second most threatened habitat type after “mires and bogs”).

No use or trade is known.

Hygrocybe subpapillata is nationally Red Listed as Near Threatened in the Netherland and Sweden, as Vulnerable in Finland and Norway and as Endangered in Austria, Croatia and Denmark (Arnolds and Veerkamp 2008, Tkalčec et al. 2008, Dämon and Krisai-Greilhuber 2017, Hyvärinen et al. 2019, SLU Artdatabanken 2020, Artsdatabanken 2021, Moeslund et al. 2023). In Germany it is nationally listed as extremely uncommon with an unclear population trend (Dämmrich et al. 2016).

Site protection and management of habitats are both very important conservation actions for this species. Grazing, at least before the onset of the fruiting season, is of fundamental importance. On sites where cattle would cause soil erosion (e.g. sloping ground, thin soils), sheep are the preferred grazing animal. Mowing, with collection of ‘arisings’, can substitute for grazing too. Further ecological research is needed to clarify resource relations of waxcaps, its population ecology and full distribution range