The UK Treasury has set out a comprehensive draft bill to bring cryptoassets into the country’s financial services rulebook under the banner of UK crypto regulation. This landmark move, announced by Chancellor Rachel Reeves during her keynote at the Innovate Finance Global Summit (IFGS 2025) on 29 April 2025, aims to balance consumer protection with a thriving digital asset industry.
Building on a 2023 HM Treasury consultation, the draft legislation extends the perimeter of the Financial Services and Markets Act 2000 to include crypto exchanges, custody providers, stablecoin issuers and other service providers. Once finalized—targeted for later this year—firms dealing in cryptoassets with UK customers will need to meet the same transparency, operational resilience and consumer-protection standards as traditional financial entities.
This initiative follows the EU’s Markets in Crypto-Assets Regulation (MiCA), which came into full effect in December 2024. By harmonizing its approach with global peers, the UK seeks to recapture its status as a leading fintech hub.
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How the draft shapes consumer safeguards
Under the proposed regime, crypto platforms will be required to:
- Register with the FCA: All exchanges, dealers and custodians must apply for authorization.
- Adhere to transparency rules: Detailed disclosures on fees, risks and asset profiles will be mandatory.
- Maintain liquidity buffers: Firms must prove they can meet client redemptions even under stressed market conditions.
- Implement robust AML/CFT controls: Enhanced KYC and transaction monitoring will guard against fraud and illicit finance.
Chancellor Reeves underscored that “too often, consumers have been left exposed to risky firms and scams,” and that “under the new rules, crypto firms with UK customers will have to meet clear standards on transparency, consumer protection, and operational resilience — just like firms in traditional finance.” Those principles lie at the heart of the consumer-safeguard agenda.
Cryptoassets regulation in comparative perspective
Although the UK left the EU in January 2020, its regulatory pace had lagged behind the EU’s MiCA roll-out. MiCA establishes detailed requirements for stablecoins, asset-reference tokens and governance standards for service providers. By contrast, the UK draft follows a more principles-based approach—favoring flexibility and future-proofing over prescriptive technical mandates.
That flexibility reflects the UK’s broader fintech strategy, which emphasizes innovation sandboxes and public-private collaboration. Nevertheless, UK authorities have made clear that innovation cannot come at the expense of market integrity or consumer trust.
Digital Securities Sandbox fosters innovation
In September 2024, the Financial Conduct Authority and Bank of England launched the Digital Securities Sandbox (DSS), allowing firms to trial distributed-ledger technology (DLT) for issuing, trading and settling securities in a live environment. The sandbox operates under a “test” regulatory regime, enabling regulators and industry participants to refine rules around digital assets and DLT.
US SEC Commissioner Hester Peirce first proposed a cross-border digital sandbox in May 2024. Reeves told IFGS attendees that she and US Treasury Secretary Scott Bessent “discussed opportunities to support industry to innovate cross-border, in line with Peirce’s proposal, potentially allowing greater digital collaboration between capital markets in New York and London.”
International cooperation and trans-Atlantic ties
Rachel Reeves emphasized that making the UK a “world-leader in digital assets” depends on strong international cooperation. She cited recent discussions in Washington DC with Bessent—following President Trump’s executive order “Strengthening American Leadership in Digital Financial Technology”—as evidence of shared ambition to position both countries at the forefront of crypto innovation.
The upcoming UK-US Financial Regulatory Working Group in June will delve deeper into harmonizing supervisory standards and exploring mutual recognition of regulatory approvals. Such alignment could streamline cross-border services and reduce costs for firms seeking to operate in both jurisdictions.
Broader fintech priorities and growth strategies
Cryptoassets regulation sits alongside major UK initiatives under the Invest 2035 industrial strategy and a forthcoming Financial Services Growth & Competitiveness Strategy. Both strategies highlight financial services and fintech as key drivers of growth. In October 2024, the government identified fintech among five “priority growth opportunities,” alongside sustainable finance, asset management, insurance, and capital markets.
In July 2024, Reeves announced a Pension Investment Review to mobilize up to £80 billion of additional pension capital into UK businesses. A final report will precede the Pension Schemes Bill, expected in late 2025. Similarly, the “Private Intermittent Securities and Capital Exchange System” (PISCES), a new exchange for trading private company shares, will be legislated in May, offering scaling opportunities for private firms before IPO.
Market uptake and consumer engagement
Survey data from the Financial Conduct Authority, published in November 2024, indicates 12% of UK adults held cryptoassets in 2024, compared with just 4% in 2021. The average portfolio was £1,842 (approximately $2,460). Public appetite for digital assets has grown sharply, but awareness of risks remains uneven. Regulatory clarity, the government argues, will bolster confidence among everyday investors.
Industry bodies such as Innovate Finance and the Crypto UK trade association have broadly welcomed the draft regime, noting that it provides a clear roadmap for legitimate firms while elevating standards across the sector. Critics warn, however, that overly burdensome requirements could stifle smaller innovators. Policymakers will need to strike a careful balance when finalizing the rules.
Looking ahead: finalization and technical consultation
The draft “Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025” spans 27 pages, accompanied by a 19-page Policy Note on the future regulatory regime. HM Treasury is soliciting technical comments until 23 May 2025. Stakeholders can review the documents and submit feedback via the Treasury website.
Assuming a smooth consultation process, the government aims to lay the final statutory instrument before Parliament in the autumn, with implementation phased in over the following 12 months. Early adopters may benefit from a grace period, during which they can align systems and controls with the new requirements.
Conclusion
The UK’s draft framework for cryptoassets marks a significant milestone in UK crypto regulation. By integrating crypto firms into the established financial services perimeter, the government seeks to protect consumers, deter illicit activity and support prudent innovation. As the consultation proceeds, industry participants and consumer advocates alike will watch closely to ensure the final rules deliver both market integrity and the flexibility needed for the UK to thrive as a global digital-asset hub.
Related Links
- Draft Cryptoassets Regulation Consultation
- FCA DP24/4: Regulating Cryptoassets
- EU MiCA Regulation Text
- Invest 2035 Strategy
Other FinCrime Central News About Crypto Regulation in Europe
- Italy Enforces EU Crypto Regulation to Tackle Illicit Transactions in 2025
- Cryptocurrency Regulation in France: Key Insights for Investors in 2025
- EU’s New Anti-Money Laundering Rules: What Banks Need to Know
Source: Global Government Fintech, by Ian Hall
