The UK’s crypto rulebook is finally taking shape

This week, the UK’s long-promised crypto regulatory regime moved closer to reality, with the Financial Conduct Authority (FCA) announcing a consultation that will ultimately define how crypto companies operate in the UK.

This proposal, together with Treasury legislation, forms the backbone of a framework due to come into force in October 2027. For policymakers, the objective is to balance growth and innovation with market health and consumer protection. The challenge for the industry is to navigate an 18-month transition period in which the destination is clearer than ever, but still has some distance to go.

“This is what it’s all about for the UK,” Dia Markova, policy director at crypto infrastructure firm Fireblocks, said in an interview. “This is the definitive regime for regulating the issuance and intermediation of crypto assets.”

From discussion to definition

Sébastien Ferrier, a financial regulation lawyer at Pinsent Masons, said the talks needed to be seen as part of a longer and more carefully sequenced process.

For more than a year, the UK has been working on a regulatory roadmap that would expand the FCA’s jurisdiction over cryptocurrencies. The first step is legislation. Regulated activities, as defined by the Treasury Department, determine what is included within the boundaries. Only then can the FCA impose licensing requirements and detailed rules.

“Last year, things really started to take shape,” Ferrier said. “We’ve had a lot of discussions and now we’re coming up with a coherent framework.”

The initial focus was on stablecoin issuance and custody, prudential requirements such as capital and cash reduction plans, and the application of existing FCA obligations (governance, systems and controls, operational resilience) to crypto companies. This week’s talks focus squarely on the market, including trading platforms, intermediaries, staking, decentralized finance, admission and disclosure, and crypto-specific market abuse rules.

Ferrier said that overall, the FCA is replacing traditional financial regulatory architecture with crypto markets, while at the same time adjusting it to reflect the risks inherent in the technology.

Hybrid regulatory model

One of the most important design choices is the UK’s decision to extend existing financial services rules to cryptocurrencies, rather than creating a separate rulebook from scratch, as the European Union (EU) did with its Market in Cryptocurrency (MiCA) Regulation.

Although this distinction is important, it is not a simplification. Mr Ferrier described FCA’s approach as a hybrid. The cross-cutting obligations (principles of integrity, conflict management and fair treatment of customers) remain largely unchanged. However, the rules for the market are created specifically for cryptocurrencies.

“There is a new admission and disclosure regime and a new market abuse regime,” Ferrier said. “They do not simply raise the rules for securities and apply them at scale. They reflect the existing framework, but they have been drafted to reflect the parameters of crypto assets and crypto services.”

He added that regulators are walking a tightrope. If it is more tolerant than traditional markets, it will likely invite criticism that cryptocurrencies are being given preferential treatment. Tighter restrictions could push activity overseas. The stated goal is “same risk, same outcome” even if the mechanism is different.

Latecomer profits and their limits

For Markova, Britain’s most important asset is timing. As the debate continues in the US, following the EU, the UK was able to observe how regulatory decisions play out in practice.

“The UK is very proactive in trying to learn lessons from other jurisdictions,” she said. “You can see that in the proposals and the political narrative.”

Malkova argued that the story is important because many of the decisions faced by banks and asset managers integrating crypto services are ultimately risk judgments made in areas that are not black and white in law. A supportive policy context produces different outcomes than a context dominated by fear of enforcement.

He also pointed to several areas where the UK is departing from EU precedent, such as clearer treatment of staking, lending and borrowing, and a more realistic recognition that crypto liquidity is global rather than bound to domestic venues.

unresolved pressure points

Despite progress, significant uncertainties remain, especially when it comes to stablecoins and DeFi.

Regarding stablecoins, Markova said policymakers recognize the need to distinguish between payments and investments, avoiding the trap of regulating merchants as financial intermediaries simply for accepting digital tokens. However, deeper questions remain unanswered, such as how foreign-issued stablecoins will be treated compared to pound-denominated stablecoins, what due diligence obligations will be imposed on platforms, and how conservative payment policies will impact adoption.

DeFi poses even more difficult conceptual challenges. The FCA has indicated that sufficiently centralized activities will be regulated in the same way as traditional intermediaries. However, many DeFi services are non-custodial by design.

“Identifying responsible actors and applying custody frameworks does not necessarily address the real risks,” Markova said. “That’s why DeFi regulation hasn’t really been resolved anywhere.”

Proportionality and global reach

David Heffron, also a financial regulation lawyer at Pinsent Masons, framed the big picture test as proportionality. The FCA claims it wants a competitive and innovative market, but the cumulative burden of conduct rules, business resilience standards and capital requirements will shape how attractive the UK is to global companies.

“It’s too early to make a final judgment,” Heffron said. “But this is an important market and I would be surprised if international operators did not want access to UK liquidity.”

Mr. Ferrière emphasized another issue that will become increasingly important in the future: extraterritorial reach. In traditional finance, determining what constitutes a ‘UK business’ is already complex. In the crypto industry, which is global and digital in nature, companies may find themselves within regulatory boundaries sooner than expected and be forced to make decisions regarding geo-blocking, restructuring, or establishing a presence in the UK.

What does success look like?

From the FCA’s perspective, success means more informed investors, less market abuse, greater trust and sustainable competition. New authorization and disclosure rules aim to standardize information about crypto assets, and market abuse provisions aim to address manipulation and information asymmetries, both of which are prerequisites for deeper institutional participation.

The cost is compliance and the regime is clearly not designed to eliminate risk. Instead, it aims to enable participants to participate in the crypto market with clearer information and stronger safeguards.

For now, the UK has crossed a key threshold, moving from an open-ended ‘framework’ to the final stage of concrete regulation. Whether a reactive strategy provides a competitive edge or simply delays clarity will become clearer as companies decide whether to build for the UK’s crypto future into 2027.