Key Contact: Andrew Tzialli – Partner

29 April 2025 was an important day for the UK crypto currency industry and casual investors alike, as it was the day the UK government published draft legislation to regulate the cryptoassets sector in the form of the Financial Services and Market Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 – Draft SI. This follows detailed proposals published in October 2023 (by HM Treasury), aimed at creating a financial services regulatory framework and regime for cryptoassets.

Whilst the draft legislation must be approved by Parliament, HM Treasury intend to have implemented this new crypto regime by the end of 2025. Given this still in draft form, HM Treasury have set a window for technical comments and feedback, highlighting their desire to introduce the new crypto regime promptly. Similarly, the Financial Conduct Authority (“FCA”) are welcoming feedback on their Discussion Paper by 13 June 2025.

At a high level, the activities regulated under the proposed legislation include:

  • Issuing qualifying stablecoins in the UK – there are three elements to this activity – offering, redemption and maintaining the value of the qualifying stablecoin. When a firm carries out any one of these three elements in the UK, they will be regulated under the activity of issuing stablecoin.
  • Safeguarding qualifying cryptoassets.
  • Operating a qualifying cryptoassets trading platform.
  • Dealing in qualifying cryptoassets as principal.
  • Dealing in qualifying cryptoassets as an agent.
  • Arranging deals in qualifying cryptoassets.
  • Making arrangements for qualifying cryptoasset staking.

Some of the activities set out, such as staking and issuing stablecoins are new activities and do not have an equivalent activity in the existing regime for regulated investments. In addition, the legislation creates new definitions for “qualifying crypto assets”, “qualifying stablecoin” and “specified investment cryptoassets” and also defines “qualifying cryptoassets” flexibly so as to capture new and emerging assets as the technology changes over time. Once implemented, a wide range of crypto activities will therefore be subject to the UK’s financial services regulatory perimeter – as such, firms carrying out the regulated activities in the UK will all require authorisation from the FCA, as well as being subject to FCA supervision.

This draft legislation builds on previous HM Treasury proposals and aims to provide “clear rules to give investors confidence and protect consumers.” To achieve this, under the new proposed rules, crypto firms in the UK will have to satisfy transparency and consumer protection standards, much in the same way traditional finance firms are required to. These new rules will therefore seek to increase protection for consumers, from scams and illegitimate crypto firms.

Of note is the government’s decision not to amend the Payments Services Regulations 2017, to bring payments using stablecoins within regulation. As stated in the policy note accompanying the draft legislation, this does not mean that stablecoins cannot be used for payments in the UK, just that they will not be regulated under this new regime.

There will be a phased implementation of the legislation once it becomes final, to allow guidance and directions to be published in advance of the full commencement. The FCA is also allowing crypto firms to submit applications for authorisation before the regime starts to apply and envisages allowing firms that choose not to apply for FCA authorisation, or are unsuccessful in their application for FCA authorisation, time to wind-down their UK business. HM Treasury also intends to legislate on cryptoasset market abuse in due course.

Comparisons with EU Legislation

Given the EU has had crypto asset legislation in place since 2023, in the form of Markets in Crypto-Assets Regulation (“MiCAR”), how do the two regimes compare?

  • MiCAR is a standalone regulation, while the UK’s draft legislation is intended to amend and extend existing legislation.
  • the UK draft legislation creates the regulated activity of operating a qualifying cryptoassets trading platform and this has not specifically been included within MiCAR.
  • MiCAR includes the regulated activity of advising on cryptoassets, while the UK draft legislation does not.
  • the UK draft legislation defines “qualifying cryptoassets” broadly and MiCAR does the same, so as to capture all types of cryptoassets.
  • Finally, MiCAR is divided rules applying to types of cryptoassets (e-money tokens, utility tokens, asset reference tokens, etc), which differs to the approach in the UK where the draft legislation is divided up into types of activities relating to cryptoassets.

Conclusion

This proposed legislation is a major step forward in the journey of regulating crypto in the UK. Rachel Reeves, UK Chancellor of the Exchequer stated “robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK.” Only time will tell if the draft legislation achieves those aspirations, though the legislation is certainly a move in the right direction for the regulation and maturity of the sector.

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