Quick view: Proposals for the future regulation of cryptoassets (UK)

Introduction 

This Quick view outlines the developing nature of the UK’s legal and regulatory framework for cryptoassets. The proposed future regime will bring a wide range of cryptoasset activities within the scope of financial services regulation, requiring firms to be authorised by the Financial Conduct Authority (FCA). A central challenge of the ongoing reforms is achieving the right balance between ensuring consumer protection and market integrity, while also creating an environment that supports innovation and sustainable growth in the cryptoasset sector.

This Quick View covers:

1. Introduction
2. Existing regulation
3. Proposed regulatory approach
4. What next?

This Quick view can be used in conjunction with the following How-to guides: Introduction to the UK financial regulators, The general prohibition – beware the consequences of breach, Overview of the financial promotion regime, Financial promotions and social media guidance, Checklists: When does a firm need to be authorised by the FCA or the PRA, Preparing an application to the FCA or the PRA for a Part 4A permission, Preparing an application to vary a Part 4A permission at the request of a firm, and Preparing an application to cancel a Part 4A permission at the request of a firm and Quick view: The financial promotion regime and the marketing of cryptoassets.

1. Introduction

The ownership of cryptoassets is increasing with the FCA’s latest research on consumer attitudes and behaviours revealing 12% of adults now own crypto, up from 10% in previous findings and the average value of cryptoassets held by individuals increasing to £1,842. The market is diverse and high-risk and the FCA recognises the need for clear regulation to support the ‘safe, competitive and sustainable crypto sector in the UK’ noting collaboration with international regulators as a priority.

Shaping rules and regulation for the sector underpins the consultation published by HM Treasury in February 2023 on the ‘Future financial services regulatory regime for cryptoassets’ (Consultation Paper).

The Consultation Paper builds on previous proposals by HM Treasury, which focused on stablecoins (see Response to the consultation and call for evidence – UK regulatory approach to cryptoassets, stablecoins, and distributed ledger technology in financial markets published in April 2022) and the financial promotion of cryptoassets (see section 2.3 below). See 1.1 as this approach has now changed.

The Consultation Paper sets out the next steps for UK cryptoasset regulation including extending the existing regulatory authorisation regime for financial services under the Financial Services and Markets Act 2000 (FSMA) to bring a range of cryptoasset activities within the FSMA regulatory perimeter. The consultation closed on 30 April 2023 and final proposals for the cryptoasset legal and regulatory framework were detailed in the HM Treasury response to the consultation which was published on 30 October 2023 (the Consultation Response).

1.1 Approach to regulation

Government approach

HM Treasury had initially intended to introduce regulation on a ‘phased basis’ with the regulation of fiat-backed stablecoins (payment-related) identified as ‘phase 1’ and broader cryptoassets activities (particularly those that are investment-related) in ‘phase 2’. This phased approach was changed by the new Labour government as detailed in a keynote address by Tuliq Siddiq MP at the Tokenisation Summit on 21 November 2024. She outlined the government’s intention to regulate stablecoins at the same time as other cryptoassets.

Work on wider initiatives such as a Digital Gilt Instrument pilot (DIGIT) and the Digital Securities Sandbox (as first tabled in the Mansion House speech on 14 November 2024) were also discussed. Currently moving through Parliament, the Property (Digital Assets etc) Bill introduced September 2024, will additionally provide enhanced legislative protections for owners of digital assets by formally classifying digital holdings including cryptocurrency and non-fungible tokens as personal property. For more information see announcement.

FCA approach

The FCA published a blog post following discussions with industry stakeholders (eg, crypto exchanges, law firms and industry associations) on shaping the approach to cryptoasset regulation. Three priority areas discussed included the admissions and disclosures regime, the market abuse regime, and rules for trading platforms and intermediaries.

Roadmap

The FCA has also published a cryptoassets roadmap setting out a projected timeline for regulatory developments, with further consultations anticipated to inform future rules and guidance. 2026 has been set as the target ‘go live’ date for the new regime (including the authorisation gateway). Key focus areas identified in the roadmap include cryptoasset regulation, market abuse controls, admissions and disclosures, stablecoin frameworks, custody arrangements, conduct and prudential standards.

To date, the FCA has issued several key publications:

• DP23/4: Regulating cryptoassets Phase 1: Stablecoins – developing the fiat-backed stablecoin regime.
• DP24/4: Regulating cryptoassets: Admissions & Disclosures and Market Abuse Regime for Cryptoassets – proposing regulatory frameworks.

On 29 April 2025, the UK government published a draft statutory instrument – The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions)(Cryptoassets) Order 2025 (2025 Order) which has been laid before Parliament. The 2025 Order introduces new regulated activities relating to cryptoassets. An accompanying policy note outlined the intended outcomes and invited technical feedback on the proposals. The consultation period has now closed.

The 2025 Order sets out provisions in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to define and classify ‘qualifying cryptoassets’, ‘qualifying stablecoins’ and ‘specified investment cryptoassets’ as new categories of specified investments. It also introduces new regulated activities for cryptoassets in the RAO– see policy note and sections 3.3 and 3.4 below.

In addition, the 2025 Order includes consequential amendments to other regulatory instruments, including updates to existing anti-money laundering and financial promotions requirements applicable to cryptoasset firms.

Additionally, in May 2025 the FCA published further discussion and consultation papers:

• DP25/1: Regulating cryptoasset activities (now closed for feedback);
• CP25/14: Consultation on stablecoin issuance and cryptoasset custody (closes 31 July 2025); and
• CP25/15: Consultation on proposed prudential rules and guidance for issuing qualifying stablecoins and safeguarding qualifying cryptoassets (closes 31 July 2025).

Further consultation papers (see the roadmap for details) are expected in Q3 2025, Q4 2025 and Q1 2026.The roadmap is not exhaustive, and timelines may vary depending on parliamentary schedules or changes in government approach. All cryptoasset firms, whether already operating in the UK, those based overseas or considering market entry should monitor these developments closely.

2. Existing regulation 

To date, the approach to the regulation of cryptoassets in the UK has been ‘piecemeal’ and is limited.

2.1 Registration requirement – Anti-money laundering and counter-terrorist financing regime

Cryptoasset businesses operating in the UK that intend to provide in-scope services in the course of business are required to register with the FCA and comply with the anti-money laundering and counter-terrorist financing regimes under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

The registration regime applies to:

• custodian wallet providers – businesses that safeguard cryptoassets on behalf of customers; and
• cryptoasset exchange providers – businesses that buy, sell, or exchange cryptoassets for fiat currency or other assets.

For the full scope of services covered under the MLRs, see the FCA Webpage – Cryptoassets: AML/CTF regime.

Registered firms are subject to ongoing compliance requirements including know-your-customer (KYC) checks, reporting and record-keeping. Any business engaging in cryptoasset activity should assess whether registration is required – see FCA Webpage – Cryptoassets: How to apply for registration.

The FCA sets out detailed guidance on the registration process, and provides feedback and expectations for good quality applications.

2.2 Activities relating to tokens

Holders of security tokens fall within the scope of existing UK financial services regulation where the tokens are considered as ‘specified investments’ (ie, an investment regulated in the UK as defined in the RAO). If a token has the characteristics of a traditional security such as a share or debenture), and confers rights and obligations eg, voting rights or entitlement to dividends, then activities involving the exchange and custody of the token will likely be considered as regulated activities in the UK under general FSMA regulation requiring FCA authorisation (unless an exemption applies).

The FCA currently categorises cryptoassets into distinct types of tokens (security tokens, e-money tokens, exchange tokens and utility tokens). This classification determines the specific regulatory framework that applies to each type.

For example, certain tokens (e-money tokens) may fall within the regulation of electronic money, under the Electronic Money Regulations 2011 or cryptoasset activities involving payment services, may fall under the Payment Services Regulations 2017.

How a cryptoasset is categorised – whether regulated or unregulated – depends on the specific features of the asset. To assist market participants and other stakeholders the FCA published non-Handbook guidance in July 2019 setting out how different types of cryptoassets may fall within the UK regulatory perimeter – see FCA Guidance on Cryptoassets.

2.3 Financial promotions

As of 8 October 2023, the financial promotions regime applies to all firms marketing ‘qualifying cryptoassets’ to UK consumers, including firms based overseas. Firms wishing to promote such cryptoassets must by law be authorised or registered by the FCA, or have their marketing approved by an authorised firm unless an exemption is available. The financial promotion regime applies regardless of what technology is used to make the promotion. It catches a broad range of marketing activities including radio advertisements, mobile applications, social media and many other types of content.

Firms must consider how they comply with the FCA financial promotion rules and communicate financial promotions for products and services in a way which is fair, clear and not misleading. It is a legal requirement for firms to make clear in their promotions which activities are and are not regulated (especially when highlighting their FCA authorisation status). Firms will also need to include prominent risk warnings and must not incentivise people to invest.

The FCA has warned they will take robust action against firms breaching these requirements. This could include takedowns of websites, placing restrictions on firms and enforcement action. In the first year of the regime alone, the FCA has issued 1702 alerts, and taking down over 900 scam crypto websites and over 50 apps.

Firms should also consider the interplay between the financial promotions regime and the Consumer Duty. A breach of the financial promotion regime constitutes a criminal offence, punishable by unlimited fines and/or up to two years imprisonment likely sanctions. The FCA has also issued guidance setting out its expectations on regulated/registered firms partnering with unregistered cryptoasset firms that may be making illegal promotions to UK consumers.

See How-to guides: Overview of the financial promotion regime, Financial promotions and social media guidance and The financial promotion regime and marketing of cryptoassets.

3. Proposed regulatory approach 

3.1 Regulation under the FSMA regime

The 2025 Order will bring certain categories of cryptoassets within the regulatory perimeter of FSMA regulation and anyone carrying out regulated cryptoasset activities ‘in the course of business’ in or to the UK will require Part 4A authorisation (see also territorial application at section 3.3 below). It will be a criminal offence to offer cryptoasset activities unless authorised (or an exemption applies).

Firms that are currently registered under the MLRs’ regime will need to become fully authorised under FSMA once the proposed new regime takes effect or, alternatively, firms will have to apply for a variation of permission (if already authorised) to include the relevant cryptoasset services in scope of their permission. Authorisation is not automatically granted to MLR firms, but the FCA will consider the regulatory history of applications and provide further information in due course. See Checklists: Preparing an application to vary a Part 4A permission at the request of a firm and When does a firm need to be authorised by the FCA or the PRA.

3.2 Understanding cryptoassets and the regulatory framework

The definition is ‘technology-neutral’ (from section 417, FSMA 2020 (as amended by FSMA 2023) as being:

any cryptographically secured digital representation of value or contractual rights that

1. can be transferred, stored or traded electronically; and
2. that uses technology supporting the recording or storage of data (which may include distributed ledger technology).

3.2.1 New categories of regulated cryptoassets

Part 2 of the 2025 Order introduce chapter 2B (cryptoassets) into the RAO, expanding the scope of specified investments:

• Qualifying cryptoasset – defined in article 88F as a subcategory of FSMA ‘cryptoassets’ which are fungible and transferable. This type of cryptoasset includes qualifying stablecoins but excludes specified investment cryptoassets, tokenised e-money and tokenised deposits;
• Qualifying stablecoin – defined in article 88G as a stablecoin that references one or more fiat currencies (like pounds or dollars), and seeks or purports to maintain a stable value in relation to that referenced fiat currency. This is achieved by the issuer either holding fiat currency, or arranging for it to be held, with or without additional assets. Notably, the inclusion of another fiat currency or asset doesn't necessarily have to support the coin’s value stability; and
• Specified investment cryptoasset – meets both the FSMA definition of ‘cryptoasset’ and qualifies as a ‘specified investment’ such as equities or bonds which are already regulated under law. HM Treasury provided an example of a token on a blockchain that represents an interest in or right to an equity. See also section 2.2 above.

3.2.2 Specified activities

Chapter 2B of the 2025 Order also sets out the associated specified activities for cryptoassets (and associated crypto-related exclusions):

• Issuing qualifying stablecoin (article 9M) – this activity is broad and captures the issuance of fiat-referenced stablecoins consisting of one or more core activities, offering, redemption, or maintaining the value of the qualifying stablecoin from an establishment in the UK. An issuer receiving fiat for stablecoin is not deemed to be accepting deposits;
• Safeguarding (article 9O) – Safeguarding and administration of qualifying cryptoassets and specified investment cryptoassets that are securities or contractually based investments on behalf of another (or arranging such). Safeguarding is defined in the 2025 Order, as having control of the cryptoasset through any means that enable that person to bring about a transfer of the benefit of the cryptoasset. ‘On behalf of another’ means where the other person holds beneficial title only, legal and beneficial title or simply has a right for the return of the relevant cryptoasset. Article 9R specifically excludes cryptoassets held on behalf of another temporarily for the purpose of settling trades. The FCA has plans to consult on a safeguarding regime for qualifying cryptoassets and relevant specified investment cryptoassets;
• Operating a qualifying cryptoasset trading platform (article 9T) – this definition is like the already regulated activity of operating a multilateral trading platform in the RAO. Defined as a system which brings together or facilitates the bringing together of multiple third-party buying and selling interests in a way that results in a contract for the exchange of qualifying cryptoassets for money (including e-money) or other qualifying cryptoassets. The intention is to ensure a clear perimeter between activities associated with cryptoasset trading, and those for the trading of traditional securities, including those in tokenised form.
• Dealing in qualifying cryptoassets as principal (article 9U) – same language as existing regulated dealing activities captures cryptoasset lending and borrowing services or as agent (article 9X);
• Arranging deals in qualifying cryptoassets (article 9Z) – same language as existing regulated arranging deal activities also captures operating cryptoasset lending platforms; and
• Making arrangements for qualifying cryptoasset staking (article 9Z7) – defined as the use of a qualifying cryptoasset in blockchain validation which means the validation of transactions on a blockchain or a network that uses distributed ledger technology (or similar). The activity is intended to include liquid staking, however, the issue of issuance of liquid staking tokens is covered by the dealing activity, so a person engaging in this activity will require the necessary separate or additional permission.

3.3 Territorial application

Firms that are dealing directly or indirectly with a UK consumer will need to be authorised in the UK regardless of whether the firm is based in the UK or overseas when they:

• operate a qualifying cryptoasset trading platform;
• deal in qualifying cryptoassets as principal;
• deal in qualifying cryptoassets as agent; or
• arrange deals in qualifying cryptoassets.

Where a firm is dealing with a UK consumer through an intermediary, they will not need to be authorised if there is an intermediary between them and the UK consumer that is a firm authorised to operate a qualifying cryptoasset trading platform or deal in qualifying cryptoassets as principal.

Overseas cryptoasset firms carrying on the above activities but serving only UK institutional customers will not be required to be authorised, provided those institutional customers are not acting as an intermediary between the overseas cryptoasset firms and UK consumers. The overseas person exclusion (OPE) has not been extended to cryptoasset firms.

With respect to firms issuing qualifying stablecoins, they will only be required to be authorised if they are doing so from an establishment in the United Kingdom.

4. What next?

Firms that provide, or are planning to provide, services relating to cryptoassets in the UK or to UK customers should consider how the proposed reforms could affect their businesses. They should also consider the requirements of obtaining authorisation with the FCA or, where applicable, variations of existing permissions. These applications are more onerous that applying for registration under the MLRs. See Checklists: When does a firm need to be authorised by the FCA or the PRA and Preparing an application to vary a Part 4A permission at the request of a firm.

Authorisation places high regulatory standards on firms, and timely preparation is key. Firms who wish to proceed with making an application to obtain authorisation should consider the regulatory requirements and engage with the FCA early in the process to understand their expectations of making a ‘good’ application. See Checklist: Preparing an application to the FCA or the PRA for a Part 4A permission. 

Firms need to stay up to date with these upcoming regulatory changes, allocate resources operationally and plan well in advance, so they are ready and equipped for implementation when it comes. In addition, consider current governance arrangements and risk management improvements that can be made to demonstrate compliance.

Additional resources

HM Treasury

Cryptoassets Taskforce: final report (October 2018)
Cryptoasset and stablecoin consultation and call for evidence (January 2021) 
UK regulatory approach to cryptoassets, stablecoins and distributed ledger technology in financial markets: response to the consultation and call for evidence (April 2022) 
Future financial services regulatory regime for cryptoassets: consultation and call for evidence (February 2023)
Future financial services regulatory regime for cryptoassets: Response to the consultation and call for evidence (October 2023)

GOV.UK

Factsheet: cryptoassets technical (updated June 2023)
Press release: New cryptoasset rules to drive growth and protect consumers (April 2025)
Policy paper: Future financial services regulatory regime for cryptoassets (regulated activities) (April 2025)

FCA

Cryptoassets
Cryptoassets: our work
Cryptoasset firms marketing to UK consumers

Related Lexology Pro content

How-to guides:

Introduction to the UK financial regulators
The general prohibition – beware the consequences of breach 
Overview of the financial promotion regime
Financial promotions and social media guidance

Checklist:

When does a firm need to be authorised by the FCA or the PRA
Preparing an application to the FCA or the PRA for a Part 4A permission
Preparing an application to vary a Part 4A permission at the request of a firm
Preparing an application to cancel a Part 4A permission at the request of a firm

Quick view:

The financial promotion regime and the marketing of cryptoassets

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