UK government publishes crypto regulation draft, clarifies exchange operation and stablecoin issuance

The UK government is introducing a new regulatory regime for crypto assets, trading exchanges, and stablecoin issuance. The document also clarifies market abuse, admissions, and disclosure regimes as part of the Financial Services and Markets Act. 

The proposals, which were first published in October 2023, are supposed to provide more regulatory clarity to the crypto sector while positioning the UK as a hub for digital assets.

In 2024, the government confirmed it would proceed in line with most of the previously published proposals, and it has now released draft statutory provisions associated with the new regulated activities for crypto assets, accompanied by an explanatory policy note.

Around 12% of UK adults now own or have owned crypto, up from just 4% in 2021.

Yet too often, people are vulnerable to scams.

So we’re clamping down, with new robust rules for cryptoassets to boost investor confidence, drive growth, and protect people across the UK. pic.twitter.com/RElZPs5zzb

— HM Treasury (@hmtreasury) April 29, 2025

Regulatory draft kicks off new crypto regime

The proposed rules rely on the foundation set by the Financial Services and Markets Act, that passed into law in 2023 and gave the Treasury the ability to draft new regulations for the crypto sector.

One of the key features of the draft legislation is that it introduces new regulated activities under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). This affects operating a crypto asset trading exchange, as any entity running such an exchange will need to comply with Financial Conduct Authority (FCA) regulations, which protect users and ensure market integrity.

This will also make issuing fiat-backed stablecoins in the UK a regulated activity, even though the government has opted not to include stablecoins under the country’s existing payment services regulation due to disproportionate regulatory burdens for current use cases.

This does not mean that stablecoins cannot be used for payments in the UK. It simply means that they will remain unregulated for payments for the time being.

Meanwhile, issuance of these stablecoins as well as their custody will be regulated under a tailored FCA framework. The FCA’s “Crypto Roadmap” details a phased approach, with consultations on various crypto aspects throughout 2025 and into Q1 2026.

Final regulations will be published in 2026, and the regime is scheduled to go live later the same year.

As for staking services, the government will clarify that crypto asset staking services do not count as collective investment schemes. This addresses previous legal uncertainty and reduces regulatory burdens for staking providers.

The FCA is expected to issue a discussion paper on staking in Q1/Q2 2025, with a consultation paper to follow in Q4 2025–Q1 2026.

UK is open to working with the US on stablecoin legislation

The European Union’s industry-specific Markets in Crypto Assets (MiCA) legislation already took effect last year. The UK’s new regulatory draft could make the country, once a regulatory hell, more enticing to investors.

Finance Minister Rachel Reeves, while speaking at Innovate Finance’s Global Summit, said the new rules are an attempt to support the country’s economic growth objective.

The legislation is planned for this year and intended to make “the U.K. a great place for digital asset companies to invest and innovate,” Reeves stated.

The UK-US relationship has delivered prosperity for businesses and working people on both sides of the Atlantic.

Today I met with @SecScottBessent to discuss the UK-US economic prosperity deal and our goal of reaching an agreement that is in both our national interests. pic.twitter.com/6ZzPVdm62X

— Rachel Reeves (@RachelReevesMP) April 25, 2025

She also revealed that the UK has plans to work with the US to “support the use and responsible growth of digital assets.”

According to a posting on the government website, technical comments on the draft rules will be welcomed until May 25, and rules for market abuse, admissions, and disclosure regimes will be published in due course.