According to news sources, the UK Treasury published a draft legislation on 29 April that expands the scope of UK crypto regulation and sets out a detailed plan to regulate activities such as staking, stablecoin issuance, custody services and crypto trading platforms. The final version will be published on 15 July and could mark a new era for digital finance in the UK.
The proposed changes, published under the Financial Services and Markets Act 2000 (Amendment) Order 2025, will formally bring crypto services into the existing financial framework.
FCA to Regulate Staking, Custody, and Stablecoins
The key change is a significant expansion of the Financial Conduct Authority’s (FCA) powers. All crypto firms operating in or targeting UK consumers will have to register with the FCA and be authorised. This includes: Custody services for digital assets, Stablecoin issuance, Operating centralised exchanges, Arranging crypto transactions, Dealing in crypto assets as principal or agent and Providing staking services to retail or institutional clients.
Chancellor of the Exchequer Rachel Reeves opined that: they want UK to be the best place to innovate. This is in line with global regulatory trends as jurisdictions compete to attract fintech talent without compromising investor protection.
New Definitions: Qualifying Cryptoassets and Stablecoins
A notable feature of the draft is the introduction of two new definitions: “qualifying cryptoassets” and “qualifying stablecoins”. These separate algorithmic or crypto-backed stablecoins from tokenised deposits and electronic money, each with its own risk and disclosure framework.
The Treasury has made it clear this isn’t about regulating decentralised finance (DeFi) as it is today. Activities with “no identifiable controlling party” are not caught by the authorisation regime – effectively giving DeFi a temporary pass while centralised services are brought into line.
Stablecoins for payments will remain outside the Payment Services Regulations for now. But future regulatory treatment will depend on how adoption develops, particularly in retail payment use cases.
Another part of the draft is geographic reach. Firms based outside the UK but serving UK consumers directly or through intermediaries, will have to be authorised. This will force offshore exchanges and custodians to rethink their UK strategy.
For stablecoin issuers, the requirement only applies if they have a physical presence in the UK. But any firm, domestic or foreign, offering staking services or holding crypto assets for UK based clients will have to comply with these new authorisation rules.
Impact on Financial Promotions and AML Compliance
The proposal also amends the Financial Promotion Order 2005. Crypto firms authorised under the new FCA regime will be able to approve their own ads. This ends the temporary workaround where non-authorised firms could use third parties for promotional approval.
At the same time the UK will harmonise its anti-money laundering (AML) rules. Under the amended Money Laundering Regulations, authorised crypto firms will no longer need to register separately for AML but will still need to comply with all AML requirements. This includes KYC and reporting under the existing 2017 framework.
Firms will need to notify the FCA when they start or stop any of the new regulated services, a requirement that reinforces the emphasis on accountability and traceability.
Phased Implementation and Wind-Down
The FCA will open an application window before the rules come into full effect. This will allow existing firms to apply for authorisation under the new rules without disruption.
Firms that don’t get approved within the transition period will enter a 2 year wind-down period. During this time they can fulfill existing commitments but will not be able to onboard new UK clients or start new crypto activity in the UK.
This gradual approach is to avoid disruption and provide a roadmap for compliance. It also reflects the governments intention to encourage responsible innovation not stifle the industry.
Treasury officials say discussions are ongoing with US counterparts to align strategies for digital securities particularly around custody, secondary trading and DeFi.
FAQs
What does the new UK crypto regulation cover?
Custody, staking services, stablecoin issuance and crypto dealing will be under FCA supervision.
When will the new rules come into effect?
Final text expected by 15 July, with phased implementation and 2 year wind down for non compliant firms.
Will DeFi be regulated under these rules?
Activities without a clearly identifiable controlling party, like pure DeFi protocols, are excluded from the authorisation regime.
Do foreign firms need UK authorisation?
Yes, if they offer crypto services to UK clients, whether based in the UK or abroad.
Are crypto promotions affected?
Only authorised crypto firms will be able to approve their own promotions under the revised Financial Promotion Order.
Glossary
UK crypto regulation – The ‘evolving legal and regulatory framework in the United Kingdom for digital asset services such as custody, trading and staking.
FCA (Financial Conduct Authority) – The UK’s financial regulator ‘that supervises financial markets and firms.
Stablecoins – Cryptocurrencies designed to maintain’ a stable value by being pegged to fiat currencies or other assets.
Custody services – Holding ‘and management of clients’ cryptoassets in a secure way.
Staking – Locking cryptoassets in a blockchain protocol to earn rewards and’ support network operations.
AML (Anti-Money Laundering) – ‘Laws and regulations to prevent money laundering and other financial crimes.
Sources
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