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The new framework for regulating crypto-assets, announced by finance minister Rachel Reeves, is intended to promote the safe use of such assets, and comes at a critical point in the industry’s evolution.
The introduced by the Labour government represent an attempt to bring crypto exchanges, dealers and agents within the scope of regulation and to provide clear rules that allow innovation and drive growth.
The goal is to apply to crypto firms operating in the UK the same levels of scrutiny faced by firms in more traditional areas of financial services, with new standards on transparency, consumer protection and operational resilience.
“Through our Plan for Change, we are making Britain the best place in the world to innovate — and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK,” said Reeves.
HM Treasury originally proposed introducing a crypto regulatory regime in October 2023, and the Labour government confirmed the plan in November 2024
The UK crypto sector has grown significantly in recent years, with research by the Financial Conduct Authority (FCA) showing that around 12 percent of UK adults owned crypto in 2024, up from 4 percent in 2021.
This growth has underlined the need for regulation to frame what is and is not permissible and to provide an appropriate level of consumer protection.
The accompanying the draft regulation states that HM Treasury intends to legislate for the new crypto-asset regulatory regime by the end of 2025, subject to parliamentary time allowing.
Any comments on the draft text should be submitted by May 23.
Key points
The draft statutory instrument defines the assets covered by the regulation as “qualifying cryptoassets”, which are “fungible and transferable” and include “qualifying stablecoin”.
It also creates the activity of issuing qualifying stablecoin in the UK.
This activity has three components: offering, redemption, and maintaining the value of the qualifying stablecoin, and undertaking any one of the three from an establishment in the UK for qualifying stablecoin brings firms within the regulatory perimeter for issuance.
Among the other provisions of the regulation, it outlines the activities for which firms will need authorisation.
These include safeguarding qualifying crypto-assets and relevant specified investment crypto-assets, and qualifying crypto-asset staking.
Alignment with the US
The UK’s move to clarify the regulatory status of crypto-assets comes at a time when the US is openly promoting the sector.
Since taking office, the Trump administration has been unabashedly pro-crypto, with significant figures in the industry appointed to key roles — one example being Cantor Fitzgerald’s Howard Lutnick, who is serving as commerce secretary.
In March 2025, the administration announced the introduction of a strategic bitcoin reserve and hosted more than a dozen crypto industry leaders, including Cameron and Tyler Winklevoss, co-founders of the Gemini exchange; Michael Saylor, executive chair of MicroStrategy; and Brian Armstrong, CEO of Coinbase, at a White House crypto summit
It has also encouraged regulators traditionally seen as sceptical or even hostile to crypto to soften their position.
Most recently, the Federal Reserve withdrew guidance for banks on crypto-assets and dollar tokens, and will no longer require banks to provide advance notification of planned or current crypto-asset activities, and will instead monitor banks' crypto-asset activities through the normal supervisory process.
The UK’s approach aligns with that of the US in that it emphasises the opportunities the crypto sector offers and signals that the country is open for business in this space.
However, the rhetoric is more cautious, with greater focus on managing risk and ensuring consumer protections are in place.
Tackling volatility
In regulating the crypto space, the UK government will be seeking to change the perception of the industry as lawless.
High-profile collapses such as the failure of FTX have created the impression that the crypto industry is a “Wild West” environment that is fundamentally highly risky.
The EU has led the way in seeking to regulate the space, with its Markets in Crypto-Assets Regulation (MiCA) having entered into force in June 2023.
MiCA provides rules for organisations issuing and trading crypto-assets covering transparency, disclosure, authorisation and supervision of transactions.
However, the level of volatility in the sector continues to raise questions within the bloc.
Earlier this month, European Securities and Markets Authority (ESMA) executive director Natasha Cazenave said crypto-assets remain “highly volatile and largely speculative”, despite the comprehensive regulatory framework in place under MiCA.
Outlook for crypto in the UK
The introduction of new regulation will clearly lead to increased compliance costs for financial organisations seeking to operate in the UK crypto space.
However, it should also lead to greater clarity, with a framework in place that allows firms to operate within established boundaries.
The government is pitching the regulation as promoting innovation, which marks something of a departure.
The FCA has previously faced criticism from the crypto industry for being overly cautious in terms of its approach to approving registrations for digital asset firms under existing money laundering regulations.
The new framework should switch things round and enable the regulator to work more effectively with crypto firms that operate within the rules.
