UK Treasury Unveils New Crypto Regulations Aiming to Boost Innovation and Investor Confidence

The UK Treasury has unveiled a draft legislation on April 29, outlining new regulations for firms offering crypto services, including stablecoins, staking, and custody. These rules are part of the government’s broader “Plan for Change,” aiming 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 are designed to make “Britain the best place in the world to innovate.” She highlighted that robust rules around crypto will boost investor confidence, support the growth of the industry, and protect UK investors.

The draft Financial Services and Markets Act 2000 (Amendment) Order 2025 mandates that firms engaging with crypto will require authorization to operate in or serve clients in the UK. This regulation introduces a new “qualifying cryptoassets” category 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.

The new activities that require authorization include issuing stablecoins, custody, operating trading platforms, dealing in crypto as principal or agent, arranging crypto transactions, and providing staking services. The policy note clarifies that using stablecoins for payments will not grant them regulation under the Payment Services Regulations, leaving future regulation open as adoption increases.

The geographic scope of the new regulatory perimeter ensures that firms directly or indirectly engaging with UK consumers must obtain authorization, regardless of their location. Additionally, firms providing custody or staking services must also be authorized if they operate in the UK or on behalf of UK consumers. Stablecoin issuers must obtain authorization only if operating from an establishment within the United Kingdom. The Treasury notes that truly DeFi activities, where no identifiable controlling party exists, would fall outside the authorization requirements.

The draft legislation will also revise the Financial Promotion Order 2005. Crypto firms authorized under the new regime will be able to approve their own promotions, eliminating temporary provisions that allowed registered but unauthorized firms to do so. This aligns the regulatory treatment of crypto promotions with that of traditional financial services.

Further amendments will update the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017. Authorized crypto firms will no longer need separate registration under anti-money laundering (AML) regulations but must still comply fully with existing AML requirements. Firms must notify the FCA when they begin or cease activities covered by the new regime.

The Financial Conduct Authority will establish an application window before full commencement to allow existing cryptoasset firms to apply for authorization. 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 activity involving UK consumers.

The Treasury stated that final legislation will be brought forward “at the earliest opportunity,” with a final Financial Services Growth and Competitiveness Strategy scheduled for publication on July 15. Discussions with counterparts on fostering cross-border collaboration on digital securities are also underway as part of broader fintech development initiatives.