TLDR
UK Finance Minister Rachel Reeves revealed plans for a “comprehensive regulatory regime for crypto assets”
Draft legislation will bring crypto exchanges, dealers, and agents under formal regulation
The UK plans closer regulatory cooperation with the US rather than following the EU’s approach
New rules cover stablecoins, staking, custody services, and trading platforms
Around 12% of British adults now own or have owned cryptocurrencies, up from 4% in 2021
The UK government has taken a major step toward regulating the cryptocurrency industry with the release of draft legislation aimed at bringing the sector under formal oversight. UK Finance Minister Rachel Reeves announced the plans on Tuesday during a fintech event, describing the move as creating a “comprehensive regulatory regime for crypto assets.”
The proposed rules will extend existing financial regulations to companies involved in cryptocurrency, including exchanges, dealers, and agents. This approach aligns Britain more closely with the United States rather than the European Union, which has developed tailored rules specific to the crypto industry.
Under the new framework, crypto firms serving UK customers will need to meet standards on transparency, consumer protection, and operational resilience similar to those required of traditional financial institutions. The government aims to finalize the legislation by the end of the year.
Growing Crypto Adoption
The timing of these regulations comes as cryptocurrency ownership continues to grow among British consumers. According to government figures, approximately 12% of British adults now own or have owned cryptocurrencies such as Bitcoin or Ethereum, a substantial increase from just 4% in 2021.
The draft rules outline several key activities that will require authorization, including issuing stablecoins, providing custody services, operating trading platforms, dealing in crypto as a principal or agent, arranging crypto transactions, and offering staking services.
For stablecoins specifically, the regulations create a new “qualifying stablecoins” category that distinguishes them from electronic money and tokenized deposits. However, the rules specify that stablecoin issuers will only be subject to regulation if they are based in the UK.
International Coordination
Reeves emphasized the importance of international cooperation in effectively regulating digital assets. During her speech, she revealed that she had discussed crypto regulation with US Treasury Secretary Scott Bessent during a recent visit to Washington, with further talks planned for June.
“For the UK to be a world leader in digital assets, international cooperation is vital,” Reeves told attendees at the annual summit organized by fintech industry group Innovate Finance.
The government’s statement highlighted that the regulatory approach aims to crack down on “bad actors while supporting legitimate innovation.” Reeves stressed that “regulation must support business, not hold it back,” addressing industry concerns that previous regulatory approaches had been too restrictive.
Some crypto industry insiders have criticized the Financial Conduct Authority (FCA) – the UK’s financial services watchdog – for being overly restrictive when approving registrations from digital asset firms. The FCA is responsible for registering firms that want to provide crypto services within the scope of money laundering regulations in the UK.
The geographic scope of the new regulations ensures that firms directly or indirectly engaging with UK consumers must obtain authorization regardless of their location. Additionally, firms providing custody or staking services must also be authorized if they operate in the UK or serve UK consumers.
The Treasury noted that truly decentralized finance (DeFi) activities, where no identifiable controlling party exists, would fall outside the authorization requirements.
The draft legislation will also revise the Financial Promotion Order 2005. Crypto firms authorized under the new regime will be able to approve their own promotions, eliminating temporary provisions that allowed registered but unauthorized firms to do so.
Further amendments will update anti-money laundering regulations, with authorized crypto firms no longer needing separate registration but still required to comply fully with existing AML requirements.
The Financial Conduct Authority will establish an application window before full implementation to allow existing crypto firms to apply for authorization. Companies that fail to secure authorization within the transition period will enter a two-year wind-down process, during which they can maintain pre-existing contracts but must cease all new business activity involving UK consumers.
The final Financial Services Growth and Competitiveness Strategy is scheduled for publication on July 15, with the Treasury stating that final legislation will be brought forward “at the earliest opportunity.”
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