The UK government has released a draft version of its much-anticipated legislation to bring cryptoasset activities under financial regulation, taking another step toward formal sector oversight. The proposal, which amends the Financial Services and Markets Act 2000 (Regulated Activities) Order (RAO), is now open for technical review.
While the draft is not yet final, it identifies new categories of regulated cryptoasset activities that would fall under the Financial Conduct Authority’s (FCA) jurisdiction. These include crypto custody services and exchange operations, among others.
However, a key omission from the proposed regulatory framework is DeFi. The draft statutory instrument (SI) explicitly excludes DeFi models from its scope, stating that no special provisions will apply to activities carried out in a truly decentralized manner. In cases where no identifiable individual or entity is conducting the activity as a business, the requirement to seek FCA authorization will not apply. The FCA will assess each situation individually to determine whether any party or group exercises sufficient control to fall under the authorization requirements in Section 19 of the Financial Services and Markets Act (FSMA).
The government emphasized that the current version is being circulated for technical feedback only—primarily to catch drafting errors or gaps in alignment with the intended policy direction, as outlined in the accompanying Policy Note. Industry stakeholders are invited to flag inconsistencies or areas needing clarification, though not to debate the broader policy approach.
At the same time, pressure is mounting on the UK government to take a more proactive stance in supporting the digital assets sector. A coalition of six major UK digital economy trade associations has urged Prime Minister Keir Starmer’s administration to appoint a dedicated crypto envoy. In a letter addressed to Varun Chandra, Starmer’s special adviser on business and investment, the group called for a coordinated national strategy to foster innovation, attract investment, and drive job creation in the blockchain and digital asset space.
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