UK Unveils Cryptocurrency Regulation Plans and US Partnership

The UK Treasury is proposing new regulations for the cryptocurrency industry, aligning closely with US standards. The plans include rules for stablecoin issuance and market conduct, with an emphasis on consumer protection and transparency. Chancellor Rachel Reeves seeks to collaborate with the US on regulatory matters, highlighting that 12% of UK adults now own crypto assets.

The UK is finally taking steps to regulate cryptocurrencies. The Treasury revealed plans to bring the crypto sector under a regulatory umbrella. This includes rules focused on stablecoins and market abuse, signalling a notable shift. Meanwhile, Chancellor Rachel Reeves mentioned that the UK aims to collaborate closely with the US in this area, ensuring responsible growth in digital assets.

A consultation document with the proposed regulations has been issued. The industry has until May 23 to provide feedback. The proposed rules mirror current US regulatory objectives regarding stablecoins, and notable exemptions for overseas issuers are included. If implemented, the UK Financial Conduct Authority (FCA) will gain the authority to regulate digital asset service providers, setting standards for exchanges, brokers, and promoting good market practices.

During her address at UK Fintech Week, Reeves highlighted her collaboration with US Treasury Secretary Scott Bessent. They discussed future engagement on digital assets. One idea on the table includes the potential for a US-UK transatlantic sandbox aimed at digital securities, following a proposal from SEC Commissioner Hester Peirce.

The Chancellor emphasised that this new approach signals to the market that the UK is supportive of business growth while discouraging misconduct. The government’s initiative, titled Plan for Change, aims to establish regulations that foster investor confidence and consumer protection in the crypto space, noting that 12% of UK adults now possess crypto assets — a significant increase from just 4% in 2021.

Under the new regulations, crypto exchanges and dealers will fall under formal regulation, which is expected to crack down on undesirable practices while encouraging legitimate innovation. Companies providing services to UK customers will need to adhere to standards similar to those in traditional financial sectors, ensuring transparency and consumer safety.

Moreover, the Chancellor announced the upcoming first-ever Financial Services Growth and Competitiveness Strategy, due for release on July 15, coinciding with her Mansion House speech. This strategy is set to boost the financial services sector, particularly focusing on fintech.

The UK has previously lagged in establishing a regulatory framework for digital assets, especially as the EU has already implemented its comprehensive regulations, MiCA, last year. However, regulatory momentum started in October 2023, which led to detailed proposals for a UK financial services regime focusing on cryptocurrencies. Just one year later, the government confirmed its commitment to moving forward with these proposals.

The Chancellor reaffirmed the government’s dedication to positioning the UK as a leading hub for digital asset technologies, committing to drive growth, security, and innovation through the Plan for Change.