UK Develops Crypto Regulations to Foster Innovation While Ensuring Investor Confidence

The UK government has moved forward with plans to create a comprehensive regulatory system for cryptoassets, aiming to balance innovation with strong market safeguards. On 29 April 2025, HM Treasury released the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 (the draft SI), accompanied by a policy document detailing its intended reach and goals Regulatory regime for cryptoassets (regulated activities) - GOV.UK [ 1 ]. This step follows a 2023 consultation and the government’s official response in October 2023, reaffirming the UK’s dedication to a customized regulatory approach for cryptoassets. The proposed law introduces new regulated activities, such as stablecoin issuance, operating crypto trading platforms, and staking services, all of which will fall under the Financial Conduct Authority (FCA)’s supervision. The FCA is expected to finalize its specific regulations by 2026, with implementation to follow at a later stage The UK regime for cryptoassets: draft rules and … [ 2 ].

The framework sets out definitions for "qualifying cryptoassets" and "qualifying stablecoins," which are the main types to be regulated. These fall under the broader "cryptoassets" category as defined by the Financial Services and Markets Act 2000 (FSMA), but do not include tokenized securities, electronic money, or deposits Regulatory regime for cryptoassets (regulated activities) - GOV.UK [ 1 ]. The new rules closely resemble those for traditional financial assets, requiring crypto businesses to uphold standards for transparency, consumer safety, and operational strength. For example, stablecoin providers must keep reserve assets in a statutory trust and clearly outline redemption rights for holders The UK regime for cryptoassets: draft rules and … [ 2 ]. Custodians managing qualifying cryptoassets are required to separate client assets from their own and maintain precise records, addressing ongoing concerns about asset protection The UK regime for cryptoassets: draft rules and … [ 2 ].

The framework’s territorial reach is also significant. The draft SI extends its requirements to foreign firms serving UK customers, obliging them to secure FCA authorization for activities like running trading platforms or offering staking services Regulatory regime for cryptoassets (regulated activities) - GOV.UK [ 1 ]. However, there are carve-outs for companies that only serve institutional clients or operate through intermediaries already authorized in the UK. This strategy aims to protect UK retail investors while preserving the country’s attractiveness for global crypto businesses The UK regime for cryptoassets: draft rules and … [ 2 ]. The FCA has also suggested exemptions from certain principles, such as the requirement to "act with integrity," to reflect the unique risks and innovative nature of the crypto industry UK regulator proposes exempting crypto firms from 'integrity' and … [ 3 ].

Alongside the regulatory boundaries, prudential and conduct standards are being developed. The FCA’s consultation documents (CP25/14 and CP25/15) propose prudential requirements for cryptoasset companies, covering areas like capital reserves, liquidity controls, and monitoring of concentration risks The UK regime for cryptoassets: draft rules and … [ 2 ]. For instance, issuers of qualifying stablecoins will need to maintain minimum capital levels and comply with "K-factor" rules to cushion against losses. The FCA’s discussion paper (DP25/1) also examines risks in lending and borrowing platforms, suggesting that retail access should be limited unless strong risk controls are in place The UK regime for cryptoassets: draft rules and … [ 2 ]. The regulator is further considering restrictions on using credit for cryptoasset purchases, such as limiting credit card use, to help prevent excessive debt UK regulator proposes exempting crypto firms from 'integrity' and … [ 3 ].

The schedule for rolling out these changes is still being finalized. HM Treasury is inviting technical feedback on the draft SI until 23 May 2025, with the final version of the law expected by the end of the year Regulatory regime for cryptoassets (regulated activities) - GOV.UK [ 1 ]. The FCA aims to complete its rules for trading platforms, intermediaries, and DeFi by 2026, giving firms time to prepare for regulatory approval The UK regime for cryptoassets: draft rules and … [ 2 ]. Industry stakeholders are encouraged to submit comments on these proposals by 13 June 2025 for DP25/1 and by 31 July 2025 for CP25/14/15, which will influence the final framework. Observers point out that, while the UK’s approach differs from the EU’s MiCA regime by integrating cryptoassets into existing laws, its focus on clarity and proportionality could strengthen the UK’s position as a leader in crypto innovation Regulatory regime for cryptoassets (regulated activities) - GOV.UK [ 1 ].