The UK government has proposed new draft legislation to regulate cryptocurrency exchanges and related entities, enhancing consumer protection and promoting industry growth. This move comes amid a notable rise in crypto adoption in the country. Additionally, the UK is seeking to strengthen regulatory ties with the US, exploring collaborative frameworks. The legislation is part of a larger agenda aimed at ensuring the UK’s leadership in the fintech space while addressing challenges faced by crypto firms.
The UK government has recently rolled out detailed draft legislation aimed at regulating cryptocurrency exchanges, dealers, and agents. Announced by Chancellor of the Exchequer Rachel Reeves during UK Fintech Week, the new rules are designed to enhance consumer protection, boost investor confidence, and ultimately promote innovation within the expanding crypto sector.
This regulatory framework will impose strict standards on transparency, consumer protection, and operational resilience for crypto firms operating in the UK. The new measures align these companies more closely with traditional financial institutions, a necessary step given the sharp increase in crypto adoption. Recent data indicates about 12% of UK adults have engaged with cryptocurrencies, a notable rise from just 4% back in 2021.
Notably, the draft legislation not only affects domestic firms but also extends to overseas businesses offering services to UK retail clients. Any company engaging directly or indirectly with UK consumers will need to ensure they are authorised by the Financial Conduct Authority (FCA). This encompasses a range of services including crypto asset trading platforms, stablecoin issuance, as well as custody and staking activities.
Keith Grose, head of UK at Coinbase, called this a significant year for crypto in the UK. Speaking to CNBC, he highlighted that both the FCA and the Bank of England are set to implement their regulatory regimes this year, asserting that it’s the moment for the UK to showcase its leadership in the crypto space.
Additionally, to tackle the global character of digital assets, the UK is keen on enhancing its international regulatory partnerships, particularly with the United States. Recently, Chancellor Reeves met with U.S. Treasury Secretary Scott Bessent in Washington, D.C. During their discussions, they explored how both nations could collaborate on digital asset regulation, including the idea of a transatlantic regulatory sandbox, proposed by U.S. SEC Commissioner Hester Peirce.
This sandbox would allow firms from both sides of the Atlantic to jointly develop compliant digital securities solutions. Furthermore, the UK–U.S. Financial Regulatory Working Group is set to continue these discussions, aiming to foster responsible growth in the digital assets arena.
The draft legislation is part of a broader “Plan for Change” agenda by the UK government to stimulate growth and innovation across the financial services sector. Nonetheless, Grose pointed out significant challenges still lying ahead, notably de-banking and regulation. He noted that nearly half of crypto firms in the UK have either struggled to obtain bank accounts or have faced offboarding – a critical barrier to building a robust financial future.
Finalised crypto legislation is anticipated after industry input on the draft, with the government set to unveil its initial Financial Services Growth and Competitiveness Strategy on July 15. As the UK navigates the path toward comprehensive digital asset regulation, these changes reflect a heightened focus on balancing innovation with consumer protection, striving to ensure a prosperous future for the crypto industry in a secure and regulated environment.
