The UK Treasury has released a draft statutory instrument that would bring various cryptoasset activities under formal financial regulation.
The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 represents a significant step toward integrating digital assets into the existing financial regulatory system.
Comprehensive Crypto Regulation
The legislation creates new regulated activities requiring FCA authorization, including:
- Safeguarding cryptoassets: Custody and wallet services that control private keys
- Operating trading platforms: Exchanges that bring together buyers and sellers
- Dealing in cryptoassets: Trading as principal or agent
- Arranging deals: Facilitating crypto transactions
- Issuing stablecoins: Creating and maintaining value-pegged tokens
- Staking: Offering validation services through proof-of-stake mechanisms
The order defines “qualifying cryptoassets” as those that are both fungible and transferable. Stablecoins receive special attention, defined as cryptoassets that reference fiat currency and maintain stable value through backing assets.
Implications For The Crypto Industry
The legislation creates a transitional period for existing businesses. Companies that apply during a designated application window will have certain protections while their applications are pending. Those rejected may have a two-year period to wind down operations.
International providers are directly affected through jurisdictional provisions that deem services offered to UK consumers as occurring within the UK, requiring authorization regardless of where the provider is based.
There are carve-outs for specific activities, including the creation and minting of stablecoins, non-commercial transactions, certain group activities, and distribution of mining/validation rewards.
The provisions also modify electronic money regulations to prevent overlap with stablecoin regulation and exclude crypto assets used in limited networks or only redeemable with the issuer.
Timeline And Enforcement
The regulatory framework will be phased in, with initial provisions enabling the FCA to start preparing rules and accepting license applications 21 days after the order is made. Full implementation will follow at a later specified date, after which operating without proper authorization will become illegal.
The FCA will maintain a register of crypto asset businesses, with authorized firms required to notify the regulator when they begin or cease offering crypto asset exchange or wallet services. This creates a comprehensive monitoring system for the sector.
The UK’s approach aligns with global trends toward increased crypto regulation while establishing a distinctive framework that could position London as a regulated crypto hub. However, the compliance costs may create barriers to entry for smaller firms and startups.
Entities currently operating under the anti-money laundering registration system will face a more rigorous authorization process, likely leading to market consolidation as some businesses exit the UK market rather than pursue full authorization.
For consumers, the regulations promise greater protection and reduced risk, though potentially at the cost of reduced product innovation and higher fees as businesses pass on compliance costs.
The draft aims to balance consumer protection with supporting innovation in the UK’s digital asset industry, though many in the sector will need to carefully evaluate compliance requirements and operational changes as the regulation moves toward implementation.