UK Crypto Hub Ambitions Stall as Policy Delays Cede Ground to Global Rivals

The UK’s ambitions to establish itself as a global crypto hub remain unfulfilled, with legislative progress lagging behind promises made by past and current governments. Despite repeated pledges to foster a crypto-friendly environment, regulatory frameworks have yet to materialize, leaving industry stakeholders in a state of uncertainty. Under Prime Minister Rishi Sunak’s Conservative government, 2022 saw proposals to recognize stablecoins as payment instruments and establish a “Cryptoasset Engagement Group” to collaborate with the industry. However, these initiatives have not translated into concrete policies, and the Labour government under Keir Starmer has shown little urgency in advancing the agenda, with crypto taking a backseat to other priorities. Tom Spiller of Rosenblatt Law noted Labour’s “cautious” approach, lacking clear alignment with the government’s broader objectives [1].

Recent developments, however, hint at a gradual shift. The HM Treasury’s 2025 consultation on amending the Financial Services and Markets Act (FSMA) proposed recognizing crypto as a legitimate asset class and enabling activities like stablecoin issuance and staking. The Financial Conduct Authority (FCA) also released a paper (CP25/14) outlining potential rules for stablecoins and crypto custody, though these remain unenacted. Meanwhile, the Property (Digital Assets, etc.) Bill, currently under parliamentary debate, seeks to classify digital assets as property—a move industry groups describe as a “major breakthrough” [1]. James Harris of Tesseract acknowledged the cautious tone of recent reforms but pointed to the 2025 consultations as evidence of a pragmatic shift toward legitimizing crypto [1].

Industry observers, however, warn that the UK’s pace of reform risks falling behind global competitors. While the EU’s Markets in Crypto-Assets (MiCA) framework and the UAE’s crypto-friendly policies are gaining traction, the UK’s regulatory environment is perceived as less competitive. Harris highlighted that the US is making “meaningful legislative progress” with its CLARITY Act, while the UK’s focus on criminal asset sales—such as the government’s $7 billion seized crypto—reflects a short-termist view [1]. CryptoUK, a trade organization, has intensified lobbying efforts, urging regulators to adopt clearer banking policies and advertising rules to support digital asset companies.

Challenges persist in aligning crypto projects with existing financial regulations. Many remain excluded from traditional frameworks, necessitating tailored rules that balance innovation with consumer protection. Spiller emphasized the need for improved management of seized crypto assets, suggesting better stewardship could benefit public finances. The government’s proposed legislation, which aims to “crack down on bad actors while supporting innovation,” may lead to industry consolidation, with smaller players struggling to meet compliance costs. This trend mirrors expectations in the US, where the CLARITY Act could reshape the market landscape [1].

Analysts like Harris caution that the UK must accelerate reforms to reclaim its crypto ambitions. While the industry has aligned with anti-money laundering (AML) requirements and adopted measures like the Travel Rule, progress remains incremental. A May 2025 paper from White & Case predicted that major players such as Coinbase and Kraken would pursue acquisitions to solidify market dominance, a trajectory that could apply to the UK if regulatory clarity improves [2]. For now, the UK’s crypto sector remains a mix of cautious optimism and unmet potential, with stakeholders awaiting decisive action from policymakers.

Source: [1] [UK crypto hopes stall, but ‘encouraging signs’ are there] [https://coinmarketcap.com/community/articles/68823d858583a45a07d71367/] [2] [May 2025 paper from three partners at international law firm White & Case] [https://www.whitecase.com/publications/2025-may-crypto-act-analysis/]