Key Takeaways
- The UK introduced draft legislation to regulate crypto assets aimed at consumer protection and boosting investor confidence.
- Crypto firms in the UK will need to adhere to regulatory standards for transparency and operational resilience similar to traditional financial entities.
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The UK government has published draft legislation to regulate crypto assets like Bitcoin and Ethereum, aiming to protect consumers and boost investor confidence amid growing crypto adoption.
Unveiled during UK Fintech Week by Chancellor Rachel Reeves, the proposed rules form part of the government’s broader Plan for Change agenda, which aims to position Britain as a global hub for fintech and responsible digital asset innovation.
Under the new framework, crypto firms offering services such as exchanges, custody, and brokerage for crypto assets must meet robust standards on transparency, consumer protection, and operational resilience — standards currently applied to traditional financial institutions.
“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 Chancellor Reeves.
The legislation seeks to address the sharp rise in crypto adoption across the UK, where 12% of adults now own digital assets, up from just 4% in 2021. This growth, however, has exposed thousands of consumers to risky, unregulated platforms and scams.
The new rules will, for the first time, place exchanges and intermediaries handling digital assets under UK regulatory authority. This will give regulators the tools to target bad actors while fostering responsible innovation through clear, enforceable standards.
What to know about the new framework
The UK government’s newly published draft legislation introduces a series of legal definitions and regulated activities designed to provide clarity, consumer protection, and market integrity.
Under the proposed framework, crypto asset service providers will, for the first time, need to be authorized by the Financial Conduct Authority (FCA) to carry out key activities.
These include operating a crypto asset trading platform, issuing stablecoins in the UK, safeguarding digital assets on behalf of clients, facilitating crypto trading or lending as a principal or agent, and providing staking services.
Stablecoins, if backed by fiat currency or assets, are also brought into the fold, though the government has confirmed it will not yet regulate them under existing payment laws.
Importantly, the regime will apply to firms based overseas if they offer services to UK retail clients. While institutional-facing firms may be exempt in some cases, any business dealing directly or indirectly with UK consumers will be required to secure UK authorization.
The legislation also includes transitional arrangements, giving existing firms time to apply and, where necessary, wind down their operations in an orderly fashion if authorization is not granted.
The framework also addresses longstanding questions around decentralized finance (DeFi). Although there are no specific provisions targeting DeFi protocols, the FCA will assess on a case-by-case basis whether a sufficiently centralized entity is conducting regulated activities.
Transatlantic cooperation on digital asset growth
In addition to domestic reforms, the UK is strengthening its international regulatory ties.
Chancellor Reeves revealed that the UK is engaging with the US through the UK-US Financial Regulatory Working Group to support the responsible growth of digital assets.
The announcement follows high-level talks in Washington between Chancellor Reeves and US Treasury Secretary Scott Bessent. Discussions included proposals from US SEC Commissioner Hester Peirce for a transatlantic regulatory sandbox, which would allow firms on both sides of the Atlantic to collaborate on developing compliant digital securities solutions.
Cooperation is seen as a key step toward harmonizing international standards, reducing fragmentation, and encouraging responsible innovation across jurisdictions.
The government plans to publish its first Financial Services Growth and Competitiveness Strategy on July 15, identifying fintech as a priority sector. The final crypto legislation will be introduced “at the earliest opportunity,” following industry consultation on the draft provisions.
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