The UK government has unveiled a 27-page draft legislation aimed at bringing cryptocurrency activities under formal financial regulation for the first time. This move seeks to foster innovation while protecting consumers by extending existing financial rules to digital assets like stablecoins, crypto exchanges, and custodial services.
The proposed regulations require crypto businesses operating in the UK, including those issuing stablecoins or running exchanges, to obtain approval from the Financial Conduct Authority (FCA). This approach aligns the UK more closely with the United States’ regulatory framework, which classifies crypto projects as securities or non-securities, rather than following the European Union’s MiCAR system that tailors rules to industry needs.
Finance Minister Rachel Reeves emphasized the government’s dual goals:
“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 fintech growth, and protect people across the UK.”
The draft laws aim to close gaps in the Financial Services and Markets Act by clearly defining digital assets and categorizing them according to investment type. This clarity will help regulators identify which crypto activities require oversight and which do not. Custodial arrangements, such as exchanges holding client funds, will be subject to stricter rules to ensure transparency and security.
The UK government has opened a consultation period inviting feedback from the public and industry stakeholders until 23 May 2025. This input will help refine the draft laws before they are finalized.
Nick Price, a finance expert at Osborne Clarke, praised the draft for providing “a great deal of certainty” to the crypto sector. The UK’s clear regulatory boundaries aim to support innovation while protecting consumers, distinguishing its approach from both the US and EU frameworks.
By integrating crypto into the existing financial regulatory system, the UK hopes to become a global leader in digital asset innovation while safeguarding its financial markets from fraud and malpractice.
Notably, Galaxy Digital has obtained a license from the UK’s Financial Conduct Authority (FCA), enabling its UK subsidiary to engage in derivatives trading from its London office.
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