The United Kingdom is taking decisive steps toward regulating the evolving crypto-asset sector with the release of its draft crypto regime, a move that integrates key activities such as trading, custody, lending, and staking into the Financial Services and Markets Act (FSMA) framework.
Laura Talvitie, a digital assets and crypto specialist at PwC UK, describes this as a “strong step” but cautions that the UK is still playing catch-up in the global race for regulatory leadership.
As outlined in PwC’s Global Crypto Regulation Report 2025, regulatory clarity is replacing uncertainty worldwide, with jurisdictions like the EU, US, Singapore, Hong Kong, and the UAE setting high standards through frameworks like MiCAR, ETF regulations, and stablecoin licensing.
For the UK to cement its position as one of the global leaders in digital assets, Talvitie emphasizes the need for faster action and sustained momentum.
The draft legislation, commented on by Hannah Meakin, a partner at Norton Rose Fulbright, provides a foundational framework that firms have eagerly anticipated to shape their UK strategies.
While not exhaustive, the legislation builds on feedback from October 2023 and updates in November 2024, incorporating industry input to refine its scope.
It categorizes cryptoassets into qualifying cryptoassets, fiat-backed stablecoins, and specified investment cryptoassets, aiming to exclude non-investment cryptoassets from regulation—a goal whose success remains uncertain.
Key activities, including issuing stablecoins, safeguarding, operating trading platforms, dealing, arranging, and staking, are further defined, though Meakin notes that debates over their precise scope are likely to persist.
The legislation also clarifies territorial scope, offering relief for non-UK firms dealing exclusively with institutional clients.
Additionally, authorized firms will not need separate registration under the Money Laundering Regulations but must notify the Financial Conduct Authority (FCA) and comply with anti-money laundering (AML) requirements.
However, Meakin stresses that the regime is far from complete.
The FCA must now outline application periods, processes, and requirements for new firms and those seeking variations of permission.
Upcoming discussion and consultation papers, as part of the FCA’s crypto roadmap, will provide further details critical to ongoing efforts.
Azariah Nukajam, Gemini’s Head of UK Regulation & Compliance, shared insights with CI, welcoming the draft Statutory Instrument (SI) as a “significant step forward” that brings clarity to the regulatory perimeter.
For Gemini, a firm rooted in compliance, this aligns with their “ask for permission, not forgiveness” ethos.
Nukajam highlights the UK’s potential to become a crypto hub, leveraging a second-mover advantage behind frameworks like the EU’s MiCAR and the pro-crypto stance of the incoming US administration.
The draft SI brings cryptoasset activities under FSMA’s “regulated activities,” requiring authorization for certain operations and aligning crypto with traditional finance (TradFi) standards on operational resilience, AML compliance, and market abuse prevention.
The regime emphasizes consumer protection through enhanced transparency, disclosure, and client asset safeguarding, ensuring investors receive clear information and their assets are secure.
Nukajam notes the government’s commitment to fostering responsible crypto innovation, with regulation designed to boost market confidence and support growth.
A phased implementation will give businesses time to adapt, with further guidance expected from the FCA and Prudential Regulation Authority (PRA).
While the draft legislation marks progress, challenges remain.
For instance, the UK must balance innovation with robust oversight to compete globally.
As Talvitie explains, speed is critical to avoid falling behind jurisdictions with more advanced frameworks.
The FCA’s forthcoming consultations will be pivotal in providing the granular details firms need to navigate the new guidelines.