On April 29, UK Finance Minister Rachel Reeves announced a new draft regulatory framework aimed at establishing the UK as a global leader in the cryptocurrency sector. The proposed regulations will bring crypto exchanges and related services under the same regulatory umbrella as traditional financial institutions, emphasizing transparency and consumer protection.
Key Takeaways
- The UK is introducing a comprehensive regulatory regime for cryptocurrencies.
- Crypto exchanges will be regulated similarly to traditional financial firms.
- New rules include capital requirements, governance standards, and market abuse regulations.
- Stablecoins will be classified as securities, requiring prospectus-style disclosures.
- Non-UK platforms serving UK clients will need FCA authorization.
Comprehensive Regulatory Regime
The UK Treasury’s statement following Reeves’ announcement highlighted the introduction of the Financial Services and Markets Act 2000 (Cryptoassets) Order 2025. This order will establish six new regulated activities, including crypto trading, custody, and staking. Unlike the EU’s Markets in Crypto-Assets (MiCA) framework, which adopts a lighter regulatory touch, the UK is opting for a more stringent approach that applies full securities regulations to the crypto sector.
Dante Disparte, Chief Strategy Officer at Circle, remarked that the UK’s draft regulations represent a significant step towards a rules-based digital asset economy. He emphasized that the clarity provided by these regulations could foster responsible innovation and growth in the UK’s digital financial infrastructure.
Implications for Crypto Firms
The new regulations will require crypto exchanges, such as Bitget, to obtain full approval from the Financial Conduct Authority (FCA) to offer services like trading, custody, and staking to UK users. Companies will have a two-year period to adjust their systems to comply with the new requirements, which include:
- Capital and Reporting Adjustments: Firms must align their operations with the new regulatory perimeter.
- Clear Definitions: The regulations will provide clear definitions of “qualifying crypto assets” and the activities that require FCA authorization.
Changes to Stablecoin Classification
One of the most significant changes in the draft regulations is the reclassification of stablecoins as securities rather than e-money. This means that UK-issued fiat-backed tokens will need to adhere to strict prospectus-style disclosures and redemption protocols. While non-UK stablecoins can still operate, they must do so through authorized venues.
Vugar Usi Zade, COO at Bitget, expressed optimism about the regulations, stating that they are a net positive for the industry. He noted that the clarity around stablecoins and their exclusion from the Electronic Money Regulations 2011 could impact their use for payments.
Territorial Reach and Compliance
The draft rules also expand the territorial reach of the regulations. Non-UK platforms that serve UK retail clients will now require FCA authorization, effectively ring-fencing the UK retail market. This change aims to ensure that all crypto services offered to UK consumers meet the same regulatory standards.
Additionally, the regulations will require registration for liquid and delegated staking services, while solo stakers and purely interface-based providers will be exempt. New custody rules will apply to any setup that grants unilateral transfer rights, including certain lending arrangements.
Looking Ahead
The FCA plans to publish final rules on crypto regulations by 2026, setting the stage for the new regulatory framework to take effect. This roadmap towards greater regulatory clarity in the UK could mirror the European Union’s implementation of its MiCA framework, which began in December 2022. As the UK positions itself as a safe harbor for crypto innovation, the industry is watching closely to see how these regulations will shape the future of digital assets in the region.
