The UK plans to introduce a more comprehensive regime for the regulation of cryptoassets, which aims to assist businesses through the confidence brought by a wide-ranging licensing and conduct regime, as well as manage financial crime and consumer protection risks.
It is proposed that the new regime will, with exceptions, apply only where cryptoassets are not already regulated under other regimes, for example, the investment services regime under the Financial Services and Market Act 2000 (Regulated Activities) Order 2001 (SI 2001/544).
At present, the only financial regulations in the UK that are specific to cryptoassets are a registration requirement under the anti-money laundering (AML) regime, and the imposition of restrictions on the marketing of cryptoasset activities under the financial promotions regime (see “Current regulation” below).
In practice, these two regimes regulate financial crime and consumer protection risks in a highly restrictive manner. Anecdotally, this has projected a sense of the UK not being “open for business” to the cryptoasset industry and deterred a number of legitimate providers from establishing themselves in the UK. The UK’s current approach stands in contrast to other leading jurisdictions that have lately become more welcoming to the cryptoasset industry (see “UK compared to EU and US” box).
Industry viewpoint
Cryptoasset businesses are likely to welcome a more comprehensive UK regulatory regime, assuming that it aims to enable, as well as proportionately regulate, what is an increasingly important and mainstream industry. To an extent, this approach is reflected in the latest draft UK rules and legislation, but while these have their attractive aspects, they also create areas of uncertainty (see “Stablecoins” and “Territorial scope” below).
Other concerns are the “stop-start” nature of the UK’s consultation process and the fragmented approach to the publication of regulatory proposals, which make it difficult for crypto businesses to assess the new regime in the round.
All in all, the UK regulatory approach, in particular its lack of speed to market, does not compare favourably with that of other key jurisdictions such as the EU and the U.S., which have moved faster to introduce regulatory frameworks that enable crypto businesses to operate with greater certainty in a more comprehensively regulated environment.
The challenge now is for the UK to accelerate the roll-out of the new regime in a way that balances its statutory objectives with the need to make the UK an attractive place to do business, in pursuit of the broader government goals of growth and international competitiveness.
Current regulation
At present, UK cryptoasset regulation addresses financial crime and consumer protection risks.
AML registration
The UK AML registration regime was extended in January 2020 to cryptoasset exchange and custody providers under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692).
These regulations implemented the EU’s Fifth Money Laundering Directive (2018/843/EU) (MLD5) but with gold plating; for example, by extending its scope beyond a narrow set of exchange and custody activities involving virtual currencies to cover a broader range of cryptoassets and a wider range of activities. The registration requirement does not apply to offshore providers that serve UK customers, provided that they take sufficient steps to avoid a UK presence.
The Financial Conduct Authority (FCA) has used the AML registration requirement to introduce a quasi-licensing regime, which has proven, in practice, to be burdensome and protracted. In 2023, the FCA had an average application processing time of 17 months, and 86% of registrations were rejected, refused or withdrawn.
More recent figures suggest that there has been an improvement in processing times and approval rates, but obtaining an AML registration remains a challenging and prolonged process compared to jurisdictions in the EU that have implemented MLD5.
Financial promotions
From October 8, 2023, the marketing of certain cryptoasset services that were not already subject to financial regulation became subject to the UK financial promotions regime under the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (SI 2005/1529) (see news brief “Financial promotions regime: bringing cryptoassets into the fold”). In contrast to the AML registration requirement, the financial promotions regime typically applies to offshore providers if they serve UK customers.
The financial promotions regime requires, subject to some exemptions, crypto firms to be authorised under financial services regulation or registered under the AML regime, or otherwise to procure a UK authorised third party to approve their marketing. In practice, this means that many offshore firms that wish to serve UK customers need to rely on these third parties at a substantial cost.
Additionally, the regime applies a number of transparency requirements and restrictions, including a potential cooling-off period, particularly when marketing to retail investors. The FCA was quick to target crypto firms, including offshore firms, that failed to comply with the financial promotions regime once it came into force.
New cryptoasset regime
On October 30, 2023, the UK published proposals for a cryptoassets licensing regime (the proposals), following a consultation entitled “Future financial services regulatory regime for cryptoassets”, which was published on February 1, 2023 (see news brief “New regulatory regime for cryptoassets: proposals for a high-tech future”).
Momentum then slowed until, on April 29, 2025, the government published the draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 (the draft order). The draft order will bring a broad range of currently unregulated cryptoasset activities within scope of a financial services licensing regime.
Although the activities are unregulated in the sense of not currently being subject to financial services licensing, they are nonetheless likely to be subject to the AML and/or financial promotions regimes discussed above.
In parallel, the FCA has been publishing a series of discussion and consultation papers on proposed prudential and conduct requirements for the new regime. These have been published in a piecemeal fashion, with the FCA yet to consult in some key areas relating to admissions and disclosures, market abuse, trading platforms, intermediation, lending and staking, and certain elements of prudential regulation. It is expected that FCA rules will be finalised in 2026, with timing of implementation of the new regime being uncertain.
Overall, the approach is to publish a comprehensive and detailed set of rules and legislation, largely based on existing financial regulation. Inevitably, the proposals raise a number of legal and operational questions, including issues that have been raised by the Financial Markets Law Committee (FMLC), which reflect broader industry concerns.
Stablecoins
The regulation of stablecoins is a key area which the new regime seeks to address and facilitate (see briefing “Stablecoins and central bank digital currencies: a developing landscape”). However, there is uncertainty as to whether stablecoins would be regulated under the draft order or the existing UK electronic money regime under the Electronic Money Regulations 2011 (SI 2011/99). This matters because there are significant differences of treatment under the proposed cryptoasset regime from the electronic money regime, including as to territorial scope.
The confusion arises from poor drafting within the draft order, and it is understood that the government’s intention is to take the regulation of tokens that are capable of falling within both regimes out of the electronic money regime and put them into the stablecoins licensing regime.
The FMLC also highlighted this area of confusion, suggesting that it should be addressed by ensuring that the regulated stablecoin definition prevails over the electronic money definition. Alternatively, the FMLC recommended that the regulatory obligations for issuing stablecoins should not exceed those for issuing electronic money, such that electronic money tokens are not inadvertently pulled into a stricter regime.
Territorial scope
The draft order and the proposals raise a number of difficult questions on territorial scope. The UK appears to intend for the draft order to introduce an attractive licensing regime for stablecoin issuers compared to the EU or U.S. regulatory frameworks. This licensing regime will be available to stablecoin issuers that are “established in the UK”.
However, “establishment” is not defined and is open to interpretation. The FMLC recommended a clearer test that would bring into scope issuance that is carried on or managed from a UK establishment, whether by UK or overseas companies.
A broader concern is when overseas firms may be subject to licensing. Overseas firms will generally be subject to licensing when providing services to UK consumers, even on a non-solicitation basis, but certain dealing-related activities could also be caught if they are only indirectly involved in transactions with UK consumers, unless their involvement is through certain UK licensed entities. This creates considerable uncertainty; for example, whether an overseas firm would need to know that they are indirectly involved, and what sort of indirect involvement would be material.
This uncertainty could make it more difficult for UK licensed firms to obtain cryptoasset liquidity from abroad. The FMLC recommended extending the overseas persons exclusion to various of the new crypto activities, so that certain overseas firms serving UK institutional clients are out of scope.
The FMLC also observed that it is unclear whether an overseas safeguarding provider would be subject to the licensing regime when providing services to an intermediary where the ultimate beneficial owner of the assets is a consumer, even if there are multiple intermediaries in the chain between the offshore entity’s client and the UK consumer, and the offshore entity does not know that the consumer is involved.
Because uncertainties exist within key aspects of the proposals, and substantial parts of the regime are yet to be consulted on or finalised, it is challenging for firms to plan for the new regime and to structure their global operations appropriately. This could slow industry momentum and deter firms from committing resources until the regulatory path is clearer.
Momentum and competitiveness
While the UK has understandably wanted to focus on key concerns in areas such as consumer protection, financial crime prevention and market integrity, and to take the time to develop a mature set of regulations, this has led to a fragmented, slow and arguably over-engineered approach to introducing a new regulatory regime.
As other key markets have raced ahead, the UK may now be at an inflection point, where a quicker and lighter-touch approach to regulation, that balances attracting legitimate players with protecting consumers and markets, may be needed in order to project the UK as again being an attractive environment for what is an increasingly important industry. The question is whether the ship can be turned around and, if so, when.
UK compared to EU and U.S.
The EU was quick to establish a comprehensive licensing and conduct framework under Regulation 2023/1114/EU on markets in cryptoassets, known as MiCA, which came into force in June 2023. The U.S. has similarly adopted a framework for stablecoin issuance under the Guiding and Establishing National Innovation for U.S. Stablecoins Act, known as the GENIUS Act, which was signed into law in July 2025.
The breadth of these framework regimes, and the speed with which they were introduced, provide comparative regulatory certainty in the EU and the U.S., even if aspects are left to be fleshed out at a later stage. Anecdotal reports suggest that this certainty, together with the ability to passport a MiCA licence across the EU, have made it more likely that cryptoasset providers will set up their headquarters in the EU or the U.S. rather than in the UK.
For further details, please read the draft order and the proposals.
