Government financial department unveils long-overdue draft regulations for digital currencies, aiming to spur economic growth and safeguard customers
The UK government has taken a significant step towards regulating the cryptoasset market with the publication of a draft statutory instrument (SI) for a new cryptoasset regime. The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, as the draft is named, is intended to bring clarity and order to the rapidly evolving crypto market, while ensuring consumer protection and market integrity.
The draft SI establishes a new regulatory framework for cryptoassets in the UK, with a particular focus on "qualifying" stablecoins - those that reference a fiat currency and seek to maintain a stable value in relation to that currency. These stablecoins will be treated as specified investments under the Financial Services and Markets Act 2000 (FSMA), subject to prudential standards, authorization, and conduct rules.
Key features of the new regime include the regulation of activities related to qualifying cryptoassets and stablecoins, with firms conducting these activities needing authorization by the Financial Conduct Authority (FCA). Firms issuing qualifying stablecoins or safeguarding qualifying cryptoassets must also be authorized and regulated by the FCA, although the regime applies only to issuers based in the UK.
The draft SI amends the existing Regulated Activities Order (2001) to bring cryptoassets, including certain stablecoins, fully into the FSMA regulatory framework. Activities such as operating a cryptoasset trading exchange, custodians, dealers, and agents, as well as stablecoin issuance, will be covered by the new regime.
The SI also updates the scope of the financial promotion regime to permit crypto authorized firms to approve their own financial promotion. The holding/safeguarding of a qualifying stablecoin and backing assets will be treated under the FCA's client money/asset rules.
Overseas firms dealing directly or indirectly with consumers will need to be authorized, but overseas stablecoin issuers will not be covered by the regulation. Decentralised finance/exchange (DeFi) is not covered by the SI, but the FCA will determine on a case-by-case basis whether or not a test of decentralization is met.
The UK and US will use the upcoming UK - U.S. Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets. An SI on market abuse and disclosures will be published "in due course".
Comments on the SI are being sought by the HM Treasury by 23 May 2025, and the new regime is part of a broader government strategy to regulate cryptoasset markets more comprehensively, balancing innovation with financial stability and consumer safeguards. This proposed regime marks a significant step towards formal crypto regulation in the UK.
The new regulatory framework, as outlined in the draft SI, will not only apply to UK-based firms involved in cryptoasset trading, but also to those issuing qualifying stablecoins or safeguarding qualifying cryptoassets, who will need authorization by the Financial Conduct Authority (FCA). Moreover, technology plays a crucial role in this initiative, as the draft SI amends the existing Regulated Activities Order (2001) to bring cryptoassets, including certain stablecoins, fully into the Financial Services and Markets Act 2000 (FSMA) regulatory framework, encompassing activities such as operating a cryptoasset trading exchange, custodians, dealers, and agents.
