UK Introduces New Crypto Rules to Curb Scams, Boost Consumer Protection

The UK is taking significant steps to enhance its oversight of the cryptocurrency sector by introducing new draft rules aimed at curbing scams and bolstering consumer protection. This move is part of a broader strategy to align the UK's regulations with those of the United States, fostering international cooperation and innovative oversight of digital assets.

The draft legislation, unveiled by Chancellor of the Exchequer Rachel Reeves during a fintech summit in London, seeks to bring cryptoasset services, including exchanges, dealers, and custodians, under the purview of traditional financial regulation. This includes setting clear standards for transparency, consumer protection, and operational resilience, which will help prevent scams and reduce risks to consumers. The government aims to create a safer environment for legitimate innovation in the digital asset sector.

Reeves emphasized that the new rules are designed to make the UK the best place for innovation while ensuring the safety of consumers. The draft legislation follows a 2023 consultation by the UK Treasury, which proposed a framework to regulate a wide range of crypto-related activities. The government plans to introduce final legislation after gathering feedback from industry stakeholders.

In addition to domestic regulatory efforts, the UK is exploring international cooperation on digital assets. Reeves announced discussions with the United States to establish a cross-border sandbox for digital securities. This initiative, first proposed by SEC Commissioner Hester Peirce, would allow firms in both countries to test new products and services under coordinated oversight. The proposal is expected to be further explored through the UK-U.S. Financial Regulatory Working Group, following a recent meeting between Reeves and U.S. Treasury Secretary Scott Bessent in Washington.

The UK government's broader push to tighten crypto oversight includes the introduction of the Crime and Policing Bill on 27 March. This bill expands law enforcement’s authority to seize digital assets linked to criminal activity and proposes stronger confiscation powers for Crown Courts. It builds on the Economic Crime and Corporate Transparency Act of 2023 and follows a series of enforcement actions, including the Financial Conduct Authority's move to block access to Pump.fun in December 2024.

Since early 2024, UK authorities have frozen £6 million in crypto linked to illicit gains, including £1.5 million held in a single Coinbase wallet. The government's proactive approach to regulating the cryptocurrency sector aims to position the UK as a global fintech hub and a leader in responsible cryptocurrency regulation, fostering innovation while protecting consumers from the risks associated with digital assets.