Successive governments have expressed their vision for the UK to become a global leader in crypto. The reality has not quite lived up to this ambition. However, while the devil will be in the details, the recent publication by the government of draft legislation, along with the steady release of policy papers from the regulator, is a cause for optimism that the UK may indeed become an international hub for crypto in the coming years.
The current position
In broad terms cryptoassets are unregulated in the UK unless they fall within existing categories of regulated investments or e-money or are used to facilitate regulated payments.
That said, some aspects of regulation do apply to the crypto sector:
- In January 2020, the Financial Conduct Authority (FCA) became the anti-money laundering and counter-terrorist financing supervisor of UK cryptoasset businesses under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. UK cryptoasset businesses must register with the FCA and, since September 2023, must collect, verify and share information about cryptoassets transfers in order to comply with the Travel Rule.
- FCA-registered cryptoasset businesses are subject to a change in control regime – any person who decides to acquire or increase control over an FCA-registered cryptoasset business must notify the FCA and await FCA approval before completing the transaction. It is a criminal offence to acquire control of an FCA-registered cryptoassets business without FCA approval.
- In October 2023, the financial promotion regime was extended to all firms promoting qualifying cryptoassets in the UK.
- There is a ban on the sale of crypto exchange traded notes and derivatives to retail customers.
In addition, the government clarified in January 2025 that qualifying cryptoasset staking does not constitute a collective investment scheme.
Financial crime
It is hard to mention crypto without referring to its misuse. According to data cited by the City of London Police, crypto featured in 66% of all reports received in 2024 by Action Fraud relating to investment fraud – a 16% increase from the previous year.
The FCA has taken a range of action to tackle investment fraud and money laundering:
- In the first year of the financial promotion regime, the FCA issued 1,702 alerts.Over 50 apps were removed from UK app stores and over 900 scam crypto-related websites were taken down.
- In July 2024, it took enforcement action against a firm enabling crypto trading in breach of restrictions that had been put on it and in February 2025, an individual was sentenced for illegal crypto activity worth over £2.5 million in what was the UK's first criminal sentencing for unregistered crypto activity.
- It is committed to educating investors about the dangers of investing in high risk investments such as crypto with initiatives, for instance, its ScamSmart campaign, which increases awareness of the strategies scammers use to defraud individuals, and its InvestSmart campaign, which launched on social media platforms to help consumers make informed investment choices.
- It has reminded regulated/registered firms that partnering with unregistered cryptoasset firms will necessarily involve careful consideration of their obligations under the Proceeds of Crime Act 2002.
Government and regulatory plans for a new regime
In November 2024, Tulip Siddiq, then Economic Secretary to HM Treasury (HMT), confirmed that the government would implement most of the proposals published in October 2023 during the Sunak administration. However the government decided for now not to proceed with bringing stablecoins into UK payments regulation.
Following on from Siddiq's speech, the FCA released a crypto roadmap providing indicative timings for the publication of a series of policy papers.
Draft crypto legislation
Arguably the most significant milestone in the journey to a fully-fledged crypto regime was the publication by HMT on 29 April 2025 of draft legislation and a policy note establishing the framework for the new regime, bringing crypto exchanges, dealers and agents within the regulatory perimeter.
Key points to note:
- The Order is in near-final form. HMT will consider technical comments on the Order. Comments had to be sent by 23 May 2025.
- There are two commencement dates. On the initial commencement date, the FCA and Prudential Regulation Authority will be given the power to issue directions, guidance and rules so that they can operationalise the new regime. Full commencement will take place on a later date, which will be set out in the final legislation.
- The legislation creates new categories of specified investments (qualifying cryptoasset, qualifying stablecoin and specified investment cryptoasset) and specified activities for cryptoassets (stablecoin issuance, safeguarding, operating a qualifying cryptoasset trading platform, dealing in qualifying cryptoassets as principal and agent, arranging deals in qualifying cryptoassets, and qualifying cryptoassets staking).
- The territorial application of the Financial Services and Markets Act 2000 (FSMA) will be amended to make sure that cryptoassets firms that service UK retail customers are required to be authorised in the UK, wherever they are located.
- It is not clear whether overseas stablecoin issuers will be required to be authorised in the UK.
- There are no provisions in the legislation for decentralised finance. Where specified activities are being carried out on a truly decentralised basis, ie where there is no person that could be seen to be undertaking the activity by way of business, then the requirement to be authorised will not be applicable. The FCA will determine in any given case whether there is a sufficiently controlling party or parties that ought to be subject to the requirement to be authorised in accordance with section 19 of FSMA.
- The legislation makes a number of consequential amendments to other secondary legislation, including existing financial promotion and anti-money laundering requirements for cryptoasset firms.
- Market abuse and admissions and disclosures provisions will be published in due course.
Subject to parliamentary approval and parliamentary time, HMT intends to legislate for the new regime by the end of the year.
FCA policy papers
At the start of May 2025, the FCA published a discussion paper (DP25/1), to inform its approach to regulating cryptoasset trading platforms, intermediaries, cryptoasset lending and borrowing, staking and decentralised finance, and the use of credit to purchase cryptoassets. The FCA's core aim is to develop a safe, competitive and sustainable crypto sector in the UK that enables innovation and is underpinned by market integrity.
Feedback on the discussion paper is required by 13 June 2025.
Earlier discussion papers have dealt with stablecoin issuance and custody (DP23/4) and admissions and disclosures and market abuse (DP24/4). On 28 May 2025, the FCA published its first set of consultation papers, which contained its proposed rules and guidance for issuing stablecoins and crypto custody and its proposed prudential rules and guidance for stablecoin issuers and crypto custodians.
The next consultation papers are expected to be on:
- admissions and disclosures and market abuse
- conduct and firm standards for regulated activities
- trading platforms, intermediation, lending and staking, and remaining material for prudential rules.
According to the roadmap, all policy statements and final rules are expected to be published in 2026. Following this there will be a period for firms to prepare ('gateway readiness') prior to the opening of an application gateway and the commencement of the new regime ('regime go-live').
International co-operation
Speaking at the Innovate Finance Global Summit on 29 April 2025, the Chancellor of the Exchequer, Rachel Reeves, emphasised the importance of international co-operation, noting that the next UK-US Financial Regulatory Working Group meeting in June 2025, will include a discussion relating to the use and responsible growth of digital assets.
Property law to be clarified
Outside of pure regulatory developments, the Property (Digital Assets etc) Bill (Bill) had its first reading in the House of Commons on 12 May 2025, having completed its third reading in the House of Lords. The Bill takes forward a recommendation of the Law Commission in its June 2023 report on digital assets and will establish in statute the common law position that certain digital assets can constitute property.
Alongside the Bill, at the request of the government the UK Jurisdiction Taskforce has established an expert group under the chair of Lord Justice Zacaroli to produce non-binding guidance on the legal concept of 'control' in relation to digital assets. This reflects another recommendation of the Law Commission's report, in which it identified that the concept of 'control', as opposed to 'possession', was appropriate to digital assets.
Help is at hand
If you have any questions about the regulatory regime for cryptoassets, please let us know.
