UK Introduces New Crypto Regulations, Aligns with US Approach
2min read The British government has introduced new draft laws that extend existing financial regulations to encompass cryptocurrencies, aligning its approach with that of the United States and diverging from European regulatory methods. This move marks a significant step in the UK's efforts to integrate digital assets into its financial framework.
Rachel Reeves, the UK financial minister, announced that the country is bringing cryptocurrencies under compulsory regulation. The 27-page draft proposes laws that affect various aspects of the cryptocurrency industry, including stablecoin issuance, exchange trading, and custodial operations. These regulations require certain crypto activities to be approved by the Financial Conduct Authority (FCA), ensuring that anyone operating a crypto exchange or issuing a new stablecoin must comply with strict British rules.
According to Reeves, "Through our Plan for Change, we are making Britain the best place in the world to innovate—and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of fintech, and protect people across the UK." The laws will address custodial arrangements, such as those involving exchanges that hold a client’s funds, extending existing financial regulations to crypto businesses. This move aims to ensure that crypto exchanges are transparent with their business practices and treat customers’ funds with care.
The draft laws also aim to address any gaps in the current Financial Services and Markets Act, particularly sections related to financial regulation. The UK government seeks to define stablecoins and other digital assets so that they can be classified and subject to the appropriate rules. By categorizing digital assets based on their type of investment, the government aims to better regulate certain activities associated with these assets. The ultimate goal is to bring the crypto industry out of the shadows, restricting bad actors and fraudulent blockchains while supporting honest traders.
Nick Price, a finance specialist, noted that the legislation provides a great deal of certainty for the crypto industry. The UK's approach is more similar to the American method of classifying crypto projects as securities or non-securities, contrasting with the EU’s strategy of tailoring regulation to fit industry requirements. The UK government will draw a clear line between what qualifies as a regulatory asset and what does not meet the standards for oversight, ensuring a more structured and transparent crypto landscape.
The draft laws are open for public and industry stakeholder feedback until 23 May 2025. This feedback will be crucial in shaping the final regulations, ensuring that they are both effective and practical for the crypto industry. The UK's proactive approach to regulating cryptocurrencies is expected to boost investor confidence, support the growth of fintech, and protect consumers, making Britain a leading player in the global crypto market.
