TLDR
- UK Treasury published draft legislation bringing crypto services under FCA regulation
- New rules will cover staking, stablecoins, custody, and trading platforms
- Foreign firms serving UK customers must obtain authorization regardless of location
- Regulations align with US approach rather than EU’s tailored framework
- Final Financial Services Growth and Competitiveness Strategy expected July 15, 2025
The UK government has unveiled draft legislation that will bring cryptocurrency services under mandatory regulation, extending existing financial rules to crypto companies. This regulatory framework, announced by Chancellor Rachel Reeves on April 29, aims to protect investors while fostering innovation in the digital asset space.
The new rules are part of the government’s broader “Plan for Change” and will require firms offering crypto services to UK consumers to obtain authorization from the Financial Conduct Authority (FCA). This applies to companies providing staking services, issuing stablecoins, offering custody solutions, operating trading platforms, or dealing in crypto as principal or agent.
“These regulations will make Britain the best place in the world to innovate,” said Reeves. She emphasized that robust rules would boost investor confidence while protecting UK consumers.
The draft legislation creates a new “qualifying cryptoassets” category and establishes clear definitions for “qualifying stablecoins,” distinguishing them from electronic money and tokenized deposits. This ensures crypto activities face the same oversight as other investments under existing financial laws.
Geographic Scope and International Alignment
The geographic scope of the regulations is comprehensive, requiring authorization for any firm engaging with UK consumers, regardless of the company’s location. This includes both direct and indirect engagement.
Interestingly, the UK approach aligns more closely with the United States than with the European Union. While the EU has developed rules specifically tailored to the crypto industry through its MiCAR regime, the UK is extending its existing financial regulation framework to cover crypto assets.
Reeves confirmed she had discussed crypto regulation with US Treasury Secretary Scott Bessent during a recent Washington visit, with further talks planned for June. This signals a transatlantic approach to crypto oversight rather than alignment with the EU’s model.
Nick Price, a financial services and crypto specialist at law firm Osborne Clarke, called it a “simple and straightforward piece of legislation” that would bring certainty, stability, and consumer protection. He noted that “the move explicitly aligns the UK with the US approach of ‘crypto as securities’.”
The regulatory push comes as cryptocurrency ownership in the UK has grown substantially. Around 12% of British adults now own or have owned cryptocurrencies such as bitcoin or ethereum, up from just 4% in 2021.
Implementation Timeline and Implications
The Treasury plans to finalize the new legislation by the end of 2025. Existing crypto firms will have an application window to seek authorization before full implementation.
Companies that fail to secure authorization will enter a two-year wind-down process. During this period, they can maintain existing contracts but must stop all new business activity involving UK consumers.
The new rules will also affect financial promotions. Crypto firms authorized under the new regime will be able to approve their own promotions, aligning with traditional financial services.
Additionally, authorized crypto firms will no longer need separate registration under anti-money laundering regulations, though they must still comply with existing AML requirements.
Truly decentralized finance (DeFi) activities, where no identifiable controlling party exists, would fall outside the authorization requirements, according to the Treasury.
Bank of England Governor Andrew Bailey has long warned about risks to investors from bitcoin, which he does not view as a secure store of value like mainstream currencies. However, he has supported regulating stablecoins, which aim to maintain a fixed value relative to traditional currencies or assets.
The final Financial Services Growth and Competitiveness Strategy is scheduled for July 15, coinciding with Reeves’ annual Mansion House speech, which will outline broader plans for boosting the UK’s financial services industry.
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