The UK Treasury recently unveiled a draft legislation on April 29 that introduces new regulations for firms offering crypto services in the UK. The legislation covers a wide range of activities in the crypto space, including stablecoins, staking, and custody services. These rules are part of the government’s “Plan for Change” initiative and are designed to bring crypto exchanges, dealers, and custodians under the supervision of the Financial Conduct Authority (FCA), aligning them with the standards applied to traditional financial services.
Chancellor of the Exchequer Rachel Reeves emphasized that these regulatory changes aim to position Britain as the premier destination for innovation in the crypto industry. The implementation of robust rules around crypto is expected to enhance investor confidence, support the growth of the sector, and ensure the protection of UK investors.
The draft legislation, known as the Financial Services and Markets Act 2000 (Amendment) Order 2025, outlines the expansion of the regulatory perimeter for firms engaging with crypto assets. It introduces a new category called “qualifying cryptoassets” and establishes clear definitions for “qualifying stablecoins,” distinguishing them from electronic money and tokenized deposits. These classifications ensure that crypto activities are subject to the same oversight as other specified investments under existing financial services legislation.
Under the new regulations, activities requiring authorization include issuing stablecoins, custody services, operating trading platforms, dealing in crypto as principal or agent, arranging crypto transactions, and providing staking services. The geographic scope of the regulatory perimeter ensures that firms, regardless of their location, must obtain authorization if they are directly or indirectly engaging with UK consumers. Additionally, firms providing custody or staking services must also be authorized if they operate in the UK or on behalf of UK consumers.
The draft legislation also includes implications for financial advertisements and anti-money laundering (AML) rules. Crypto firms authorized under the new regime will have the ability to approve their own promotions, aligning them with the regulatory treatment of traditional financial services. Furthermore, amendments will be made to the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017, eliminating the need for separate registration under AML regulations for authorized crypto firms.
The timeline for implementation includes an application window established by the Financial Conduct Authority for existing cryptoasset firms to apply for authorization before full commencement. Firms 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 activities involving UK consumers.
The Treasury plans to bring forward the final legislation at the earliest opportunity, with a final Financial Services Growth and Competitiveness Strategy set to be published on July 15. Discussions with US counterparts on fostering cross-border collaboration on digital securities are also ongoing as part of broader fintech development initiatives. These regulatory changes mark a significant step towards creating a more secure and regulated environment for crypto services in the UK.