UK sets out draft law for regulating cryptoassets

The UK Government has released draft legislation for regulating cryptoassets. The legislation defines the scope of which assets and activities will be captured in the scope of the future cryptoasset regime. HM Treasury invites technical comments until 23 May 2025 and plans to legislate before the end of the year.

New regulated activities

The draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 amends existing legislation to bring cryptoassets within the regulatory perimeter for financial services.

For example, it introduces new regulated activities such as issuing a qualifying stablecoin, operating a qualifying cryptoasset trading platform, and safeguarding qualifying cryptoassets and specified investment cryptoassets. It also provides for exclusions from those activities.

Unless an exclusion applies, firms providing these services in (or, in some cases, to) the UK will in due course need to be authorised and supervised by the UK Financial Conduct Authority. Once the regime takes effect, these firms must comply with the FCA’s rules on, for example, transparency, consumer protection and operational resilience.

Scope

The draft law is important for determining what is going to be in and out of scope of the future regime. For example, a key consideration will be the geographic perimeter of the regime. Some overseas firms which deal with UK consumers will need to be authorised in the UK if they provide certain activities but others, such as those dealing only with institutional customers, may not be caught in certain circumstances.

In a policy note published alongside the draft legislation, HMT confirms that the regime is not intended to apply to truly decentralised arrangements (DeFi).

Transitional arrangements

The FCA will allow firms to submit applications for authorisation before the regime starts to apply. The draft law envisages allowing firms that choose not to apply, or which are unsuccessful in their application, additional time to wind-down their UK business.

Background

In 2023 HMT published its plans for a future cryptoasset regulatory regime – see our blogpost: UK confirms regulatory policies aimed at creating a “global hub” for crypto. Last year the government confirmed that it would proceed with the regime broadly in line with those previously published proposals.

Next steps

HM Treasury welcomes technical comments on the draft law by 23 May 2025. It will separately publish provisions relating to the market abuse and admissions and disclosures regimes for cryptoassets.