The Government has already adopted this approach in other areas of crypto regulation. For example, it intends to exclude NFTs from the scope of the crypto promotions regime. The “same risk, same regulatory outcome” principle underpins the approach to cryptoassets, with the regime expecting cryptoassets activities to meet the same regulatory standards expected of similar traditional FS activities. The proposed activity-based framework covers a broad suite of https://www.xcritical.com/ crypto activities, and references new powers that HMT is set to receive via the Financial Services and Markets Bill (FSMB). The publication presents a tailored approach for fiat-backed stablecoins, and a separate comprehensive, activity-based regime to bring key crypto players within the UK regulatory perimeter. HMT’s roadmap does not amount to a detailed regulatory framework – that will only come after the Financial Conduct Authority (FCA) consults on detailed firm rules.

• This follows approval by the US Securities and Exchange Commission (SEC) of spot Bitcoin ETFs in January 2024.
• The government is standing by previous proposals to create new regulated activities for cryptoassets, including for the operation of a cryptoasset trading platform, as well as an extension of the market abuse rules.
• Cryptoassets are defined broadly in the FSMB [1], aimed at capturing all current types of cryptoassets.
• To facilitate a smooth transition, the FCA will introduce a proportionate process, and will try to avoid asking for the same information twice.
• The FPC emphasized that cryptocurrencies do not hold any claim on future income streams or collateral.
• And so, regulatory divergence is an additional challenge for this global and highly interconnected market.

Next steps for financial services firms

If firms Prime Brokerage are registered with the FCA it means they follow a level of AML regulation acceptable to the FCA and conduct appropriate customer due diligence and checks before onboarding clients. As transactions are time-stamped on the blockchain and mathematically related to the previous ones, they are irreversible and impossible to alter. Companies must implement a clear set of procedures to stay compliant with the AML requirements and UK crypto regulation introduced in the MLRs in 2017.

Positive sentiment returns but underlying risks persist

Meanwhile, the US is moving to craft regulations amid rising concern that the cryptocurrency industry is a haven for criminals. The digital tokens, which emerged in 2014, can be thought of as certificates of ownership for virtual or physical assets. NFTs have a unique digital signature which means cryptocurrency regulations uk they cannot be copied or replicated. The Treasury has announced that it will regulate some cryptocurrencies as part of a wider plan to make the UK a hub for digital payment companies.

UK Treasury to overhaul crypto regulations to strengthen AML measures

The more transactions that the network needs to process, the longer each transaction takes. This is because there are only so many nodes competing to solve the computational puzzle (the step required to verify a transaction) at any one time. Through third-party intermediaries who safeguard the cryptoassets on behalf of the consumer (akin to banks). These platforms have made the cryptoasset technology more accessible to everyday users. ✅These measures stem from the Financial Services and Markets Act, subjecting crypto firms to the same rules as traditional financial services.

In practice, this means that firms servicing UK customers from another jurisdiction may need to seek authorisation, subject to certain potential exceptions. Reverse solicitation may be one exception, although HMT notes it should be defined in a way that prevents misuse and regulatory arbitrage. The FCA’s guidance also makes it clear that many tokens can take a hybrid form and fall into different categories at different points in time; for example, they may be used to raise capital at first, then primarily as a means of exchange later on.

Cryptoassets can be bought and sold on centralised cryptoasset exchanges; the exchange may also store the cryptoassets. Crypto exchanges dealing with security tokens must be registered with the FCA, making them regulated entities in the UK. The evolving space of UK crypto regulation reflects the nation’s commitment to fostering a secure and transparent digital financial environment. The Financial Conduct Authority (FCA) plays a pivotal role in overseeing UK crypto regulations, emphasizing Anti-Money Laundering measures, and ensuring compliance. ✅New UK government regulations mandate crypto companies to disclose trading risks and advertise responsibly. These proposals will place responsibility on crypto trading venues for defining the detailed content requirements for admission and disclosure documents – ensuring crypto exchanges have fair and robust standards.

The roadmap sets out a series of consultations focused on different aspects of the future regulatory regime to be held over the course of 2025 and during the first quarter of 2026, with the final rules published in 2026. The roadmap was published together with the FCA’s fifth piece of research on consumer attitudes and behaviours toward cryptoassets. The research shows a continued rise in people in the UK that are aware of crypto (now up to 93%) and continued growth of cryptoassets ownership (now up to 12%), highlighting the need for clear regulation. Importantly, it’s clear from the study that cryptoassets have gone past the stage of infancy in the context of imbedding into the ‘everyday life’ of consumers and are here to stay. In addition, to address industry concerns about the small number of Financial Conduct Authority (FCA) authorised cryptoasset firms who can issue their own promotions, HM Treasury is also introducing a time limited exemption.

Bitcoin was the first and is the most popular cryptoasset, currently holding the highest market cap of any coin. Bitcoin’s design set a precedent for future cryptoassets, however each has their own unique specifications. Finally, users can trade their cryptoassets using decentralised exchanges, which facilitate cryptoasset exchange through smart contracts. There are no AML/KYC requirements to use decentralised exchanges, making them vulnerable to abuse by criminals. Cryptoassets are increasingly accessible through cryptoasset exchanges, and their trading volumes have increased significantly in recent years despite high market volatility.

Nonetheless, the Commission argues that the flexibility of common law can accommodate a distinct category of personal property to better recognise and protect their unique features. The Commission also recommends legislation to confirm the existence of this category and remove any uncertainty. It remains to be seen whether this will include specific accommodation for FCA-registered crypto firms to continue providing crypto services.

The law treats crypto-tokens, NFTs and cryptocurrency as things that exist through the combination of the active operation of software by a network of participants and specific data used by that software and network. Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). There is also the potential for a hardware wallet containing cryptoasset information being lost, stolen or attacked.

Our robust approach to regulation mitigates the most significant risks, while harnessing the advantages of crypto technologies. This enables a new and exciting sector to safely flourish and grow, boosting jobs and investment. UK Financial Services Minister John Glen said the UK saw “enormous potential in crypto” and had a “detailed plan [for] harnessing the potential of blockchain and supporting the development of a world-best crypto ecosystem”. One type of crypto-token is a non-fungible token (NFT), which is a crypto-token that is unique or capable of being differentiated from other crypto-tokens.

The failures of crypto issuers, exchanges, and hedge funds—as well as a recent slide in crypto valuations—have added impetus to the push to regulate. Ms. Siddiq highlighted the transformative potential of distributed ledger technology (DLT) in both cryptoassets and traditional markets through tokenisation and other digital assets. She prioritised supporting the sector to maximise this technology’s capabilities, noting progress with the launch of the Digital Securities Sandbox (DSS) and the announcement of a Digital Gilt Instrument (DIGIT) pilot in the DSS. As the UK moves forward to design and implement a phased regulatory regime, the FCA has published a discussion paper DP23/4.

Cryptoassets serve as a pseudo-anonymous and relatively quick method of moving funds globally. There are low barriers to entry, users merely need an internet-connected device to transact with cryptoassets. Given these characteristics, it is therefore no surprise that this technology is being exploited by criminals and terrorists alike. ✅Crypto firms must be authorized or registered with the Financial Conduct Authority to promote crypto assets responsibly. UK crypto regulations are still not strong enough to prevent cross-border money laundering, but they are slowly improving. Furthermore, the FCA maintains a register of such providers and issues regulatory guidelines.