The UK government announced on April 28, 2025, a comprehensive plan to regulate cryptocurrencies, integrating digital assets into the Financial Services and Markets Act to enhance consumer protection and combat financial crime.
The Financial Conduct Authority (FCA) will oversee crypto-asset firms, requiring registration and compliance with anti-money laundering (AML) and counter-terrorism financing rules, aligning with global standards set by the Financial Action Task Force (FATF). The move aims to position the UK as a leading crypto hub while addressing risks highlighted by recent market volatility.
The regulation, effective from July 2025, mandates that crypto firms, including exchanges like Binance and Coinbase, obtain FCA licenses, with penalties for non-compliance including fines up to £5 million or license revocation. Stablecoins, pegged to assets like the pound, will face stricter rules to ensure backing by liquid reserves, following the 2022 TerraUSD collapse. The Treasury estimates the crypto sector contributes £2 billion annually to the UK economy, but unregulated platforms have facilitated £1.2 billion in illicit transactions since 2023, per FCA data. The new rules also require firms to disclose risks in marketing materials and segregate client assets, per Reuters.
The UK’s approach draws on the EU’s Markets in Crypto-Assets (MiCA) framework, with provisions for decentralized finance (DeFi) protocols to remain exempt if fully decentralized, per Global Legal Insights. The government has rejected a regulatory sandbox, unlike the EU’s 2023 blockchain initiative, citing resource constraints. Finance Minister Rachel Reeves emphasized balancing innovation with stability, noting that 12% of UK adults own crypto, per a 2024 FCA survey. The regulation follows Bybit’s decision to cease services for French users by January 2025 due to EU pressures, signaling global regulatory tightening, per Cointelegraph.
Industry leaders welcomed the clarity but warned of compliance costs, with smaller firms facing up to £500,000 in setup fees, per The Guardian. The FCA has set a six-month transition period, with 50 firms already in its temporary registration regime. The UK aims to attract investment while curbing fraud, with the National Crime Agency reporting 15,000 crypto-related scams in 2024. The regulation marks a shift from the UK’s post-Brexit light-touch approach, aligning with G7 commitments to standardize crypto oversight by 2026, positioning London as a safer but competitive market.