UK cryptoasset regulation: where are we now?

The UK is entering a key phase as it lays the foundations for its cryptoasset regulatory regime. Legislation to regulate cryptoassets will soon be put before Parliament and the Financial Conduct Authority is drafting the rules which will apply to cryptoasset activities. As the new regime takes shape, firms should assess the impact on their business and, where necessary, start planning to apply for appropriate licences.

New law to set scope of cryptoasset framework

The UK Government will shortly lay before Parliament legislation to regulate cryptoasset activities. This follows a short consultation earlier this year on the draft law. While this was framed as a technical consultation, it revealed several substantive changes to the Treasury’s previous proposals and prompted various industry responses.

The legislation outlines several new regulated activities. These include:

• issuing a qualifying stablecoin in the UK,
• operating a qualifying cryptoasset trading platform,
• dealing in cryptoassets as principal or as agent,
• arranging deals in qualifying cryptoassets,
• qualifying cryptoasset staking, and
• safeguarding qualifying cryptoassets and relevant specified investment cryptoassets.

The legislation defines each activity and any relevant exclusions. In doing so, it sets the perimeter of what will be caught by the incoming cryptoasset regime.

The regulated activities are generally framed to apply when they are provided in or to the UK. Subject to exclusions, this would bring overseas firms who provide services to UK consumers into the scope of the UK regime.

An important exception to this is the activity of stablecoin issuance. This regulated activity will only apply to businesses established in the UK, effectively allowing overseas firms to issue stablecoins into the UK without triggering a licensing requirement for that activity (although they may need a licence for other regulated activities).

Read more: UK sets out draft law for regulating cryptoassets

FCA’s crypto roadmap

While HMT is responsible for setting the perimeter of the regulatory regime, the FCA is working through a “crypto roadmap” to develop the rules that will apply to firms under the regime.

The FCA has already consulted on new rules for:

• issuing qualifying stablecoins,
• safeguarding qualifying cryptoassets, and
• prudential standards for cryptoasset firms.

It has also consulted on how it plans to apply aspects of its existing rulebook to cryptoasset businesses.

Stablecoin issuance

In CP25/14 the FCA proposed that stablecoins in the scope of the UK regime should always be fully backed. Core backing assets are bank deposits and short-term government debt. Issuers may hold certain other assets if they meet certain conditions.

Various requirements would then apply to the management of these backing assets. For example, the assets must be held through a third party on trust for stablecoin holders and kept separate from the issuer’s own assets. The FCA also plans to require daily reconciliations of the number of stablecoins issued versus the valuation of the total pool of assets.

Read more: FCA proposes rules for stablecoin issuance

Crypto custody

The FCA expects custodians to protect their customers’ assets. In the cryptoasset context, this means keeping client assets in different wallets to the custodian’s own assets. The FCA wants crypto custodians to hold these segregated assets on trust for their clients.

Other FCA proposals would require crypto custodians to keep accurate records about the assets they hold and put in place controls and governance processes to protect client assets. For example, a custodian can only use a third party to support its custody services if it is in the best interests of the client to do so and the custodian’s governing body has approved the arrangement.

The FCA will cover other aspects of cryptoasset custody in future consultations. These include requiring firms to make regular reports to the FCA about the cryptoassets they hold for clients and to appoint a senior manager specifically responsible for management of client assets. The FCA is also considering additional or different rules for the custody of certain security tokens and other cryptoassets that are already regulated investments under the existing regime.

Read more: FCA proposes rules for cryptoasset custody

Capital requirements

In a separate consultation (CP25/15) the FCA focuses on capital, liquidity and other prudential requirements for stablecoin issuers and custodians safeguarding cryptoassets. The FCA proposes similar prudential requirements as apply to UK investment firms in the traditional finance sector.

The consultation covers:

• Composition of capital
• Capital requirements
• ICARA process
• Liquid assets
• Concentration risk

When calculating their composition of regulatory capital, firms will be required to deduct the value of any cryptoasset that it or a connected party has issued, except for any regulated stablecoins backed in compliance with the FCA’s regulatory requirements.

A second consultation on more aspects of the FCA’s prudential regime is expected later this year or early next year.

Read more: FCA proposes MiFID-style capital requirements for crypto firms

Extending existing rules to crypto

The most recent FCA consultation (CP25/25) explores how the FCA’s Handbook rules will apply to firms conducting regulated cryptoasset activities. This includes high level standards, such as the FCA’s Senior Managers and Certification Regime and its financial crime and operational resilience rules. It also covers conduct of business standards, such as the FCA’s Consumer Duty and anti-greenwashing rule, as well as the application of the Financial Ombudsman Service to the cryptoasset regime.

For firms that are new to FCA regulation, the application of these existing rules and extensive supporting guidance will represent a significant shift in compliance demands.

Read more: FCA tailors how its rulebook will apply to cryptoasset activities

Looking ahead

The UK Government is working towards introducing the new licensing regime by the end of 2026, subject to transitional measures. All eyes will be on how the legislation it lays before Parliament this autumn differs from the draft released earlier this year.

The FCA is working on other aspects of the future cryptoasset regime. This includes proposing market abuse rules for cryptoassets and a regime for admission to trading. This was the subject of a discussion paper which closed in spring 2025. Read more: FCA takes first step on its crypto roadmap

Meanwhile, the FCA has loosened restrictions on exchange-traded cryptoasset products for retail customers. Read more: UK to allow wider sale of crypto exchange-traded products

The Bank of England is also expected to put forward its regulatory approach to systemic stablecoins, following a discussion paper in 2023.

The recent burst of activity from UK policymakers is in part a desire to keep up with other jurisdictions. For example:

• the EU’s Markets in Cryptoassets Regulation now applies subject to transitional measures which are allowing Member States to phase in the rules over the coming months (read more: EU passes milestone on road to crypto regulation),
• the US has introduced its first major federal digital asset-focused legislation (read more: History is Made: Crypto Week Sees Trump Sign GENIUS Act Into Law), and
• a new Ordinance in Hong Kong introduces a regulatory framework for certain stablecoin issuers (read more: Hong Kong launches new stablecoin regime).