Preparations underway for expanded crypto regulation in the UK, expected to be in place by 2026.
The UK's Financial Conduct Authority (FCA) has announced a comprehensive new regulatory regime for crypto firms, aimed at creating a secure and transparent environment for the growing crypto industry within the UK.
### Overall Regulatory Framework
In May 2025, the FCA published three key papers outlining the new regime, including consultation papers on detailed rules and a discussion paper on key policy positions. The regime introduces new regulated activities under draft legislation, tailored for cryptoassets and similar to those governing traditional financial services. These activities include operating a qualifying cryptoasset trading exchange, dealing in qualifying cryptoassets, and staking qualifying cryptoassets.
### Focus on Stablecoins and Other Activities
The regime pays particular attention to stablecoins, recognising their importance and risks in the crypto ecosystem. Proposals include rules and guidance for issuing stablecoins and prudential requirements and safeguards for stablecoin issuers to protect consumers and investors. Custody and safeguarding rules for cryptoassets have also been proposed, ensuring firms holding customers' digital assets meet strict standards.
### Process for Currently Registered Firms and Overseas Platforms
All cryptoasset trading platforms, including non-UK overseas platforms servicing UK retail customers, must obtain FCA authorization. Non-UK platforms will need to establish a physical presence in the UK to get authorized. The FCA is still deciding on how it will define "retail customers" served by overseas platforms, particularly if the platforms primarily interface with institutional intermediaries that have underlying retail clients.
### Prudential Capital Requirements
The FCA proposes capital and liquidity rules modeled largely on existing investment firm rules. Authorized crypto firms must continuously hold adequate regulatory capital, composed of common equity tier 1, additional tier 1, and tier 2 capital instruments. Detailed criteria govern these capital instruments to ensure firms have financial resilience.
### Anti-Money Laundering (AML) and Customer Protections
AML and Counter-Terrorism Financing (CTF) compliance remain central, with robust Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements enforced on crypto businesses. The FCA regularly monitors compliance to mitigate money laundering risks linked to crypto activities.
### Summary
The FCA's new regime is designed to create a comprehensive regulatory framework for crypto firms that covers trading platforms, intermediaries, stablecoin issuers, and custodians. It emphasises consumer protection, financial stability through prudent capital requirements, and compliance with AML/CTF laws. Existing registered firms, as well as overseas platforms serving UK retail customers, will have to obtain FCA authorization, possibly requiring a UK physical presence. The focus on stablecoins and staking activities reflects the FCA's intent to address emerging crypto risks holistically.
This regime aims to promote investor confidence and protect consumers while enabling the crypto industry’s growth within a regulated, transparent environment. However, the FCA's approach to crypto remains cautious, with repeated warnings about its unregulated and high-risk nature.
In the new regulatory framework announced by the UK's Financial Conduct Authority (FCA) in May 2025, investing in cryptocurrencies like bitcoin is subject to stringent rules and regulations, as operating a qualified cryptoasset trading exchange and dealing in qualifying cryptoassets are now regulated activities. The FCA also proposes prudential capital requirements for firms engaged in these activities, similar to those governing traditional financial services, to ensure financial resilience and minimize risks associated with technology-based finance.
