The United Kingdom is poised to become a leading global digital asset hotspot, following years of fragmented oversight and leadership changes that delayed progress. With the publication of draft legislation in April 2025, the UK government has committed to a comprehensive regulatory framework for crypto assets and stablecoins, aligning closer with EU standards under MiCA while tailoring rules to the UK’s Financial Services and Markets Act. The new rules introduce rigorous requirements for crypto firms, including licensing, consumer protection, and market abuse prevention, and signal growing institutional acceptance. As the nation prepares to implement these regulations by 2026, the financial sector is already adapting—with firms like Wyden offering robust institutional digital asset trading infrastructure for a compliant offering.
Regulatory background – slow progress amid political turmoil
The UK has historically lacked comprehensive cryptocurrency regulation. However, successive governments have acknowledged the need for oversight and have set out plans to make the country a global hub for crypto asset technology. Unfortunately, several changes in leadership over recent years mean that the necessary legislation has not progressed as rapidly as in other jurisdictions, such as the EU or Turkey.
Since 2020, crypto asset service providers (CASPs) and custodian wallet providers operating in the UK have been required to register with the financial regulator, the Financial Conduct Authority (FCA), for anti-money laundering (AML) compliance. Furthermore, all firms that market crypto services to UK residents must also now register with the FCA.
However, the global advancement of crypto regulations, along with significant concerns about crypto fraud and scams, prompted the government to develop a more structured regulatory approach. In 2023, the Conservative government laid out comprehensive plans developed by its Cryptoassets Taskforce, which comprised the government treasury, the FCA, and the Bank of England.
The plans covered areas including definitions of crypto asset types and associated regulated activities, as well as rules covering sales and solicitation, taxation, and anti-money laundering requirements, among others. Despite the progress, these plans were waylaid by the announcement of a general election in mid-2024, which would result in the appointment of a new Labour government.
Current regulatory developments
On 21st November 2024, the Economic Secretary to the Treasury outlined the UK government’s regulatory plans for crypto assets and stablecoins. These plans were published by HM Treasury on 25th November and (with a few exceptions for stablecoins) effectively build on the Conservative government proposals from October 2023. On 29th April 2025, the government formally published these plans as draft legislation, along with a policy note that clarifies and explains several points that were open to interpretation in the original draft rules.
These include a distinction between “qualifying crypto assets,” described as fungible and transferable, which includes most cryptocurrencies and stablecoins, and “specified investment crypto assets” such as tokenized securities. While qualifying crypto assets are under the scope of the new rules, specified investment crypto assets will be regulated under existing FSMA rules governing traditional assets.
The government’s position is that crypto assets and associated activities will be expected to follow the same standards as other similar financial services, and so it is applying the existing framework laid out in the UK Financial Services and Markets Act (FSMA).
Consequentially, given a shared regulatory history involving the MiFID rules, the new UK regulations will follow a broadly similar format as the EU’s MiCA regulation, with a set of general requirements for CASPs, along with obligations that are specific to the type of service.
General requirements for UK CASPs – and the distinction between a retail or institutional client base
All crypto firms will be subject to some common requirements regardless of the type of crypto asset activity with which they are involved:
- FCA licensing – all firms will be required to undergo licensing by the FCA, where the application will ask for details such as operations, services and business plans, organizational and governance arrangements, controls and risk management processes, and cybersecurity, among others. Governance and operational resilience arrangements must be robust and fit for purpose.
- Prudential requirements – licensed firms must have sufficient financial resources to carry out their business prudentially. The FCA will set capital and liquidity requirements based on the type of business and associated risk.
- Resolution and insolvency – insolvency powers under FSMA will allow the FCA to participate in insolvency proceedings, similar to other financial firms. HMT will consider whether a bespoke resolution regime should be developed over time.
The policy note issued on 29th April 2025 clarifies the geographical scope of the new rules. The central principle is that CASPs dealing with UK retail users, either directly or indirectly, will need to be authorized for operation in the UK, regardless of whether the CASP itself is physically located in the UK or elsewhere. The note covers CASPs that are operating a qualifying crypto asset trading platform; dealing in qualifying crypto assets as either principal or agent, or arranging deals in qualifying crypto assets.
However, if a CASP is dealing with UK consumers via an intermediary, only the intermediary is required to be authorized. Furthermore, the rules clarify that authorization is not required for overseas firms carrying out the above activities exclusively for institutional clients, provided that the client firms are not acting as an intermediary to serve UK consumers.
Specific requirements for UK CASPs
Along with the general requirements, firms will be subject to rules depending on the type of activity they offer.
Issuance and admission to trading venues
The framework will mirror the multilateral trading facility (MTF) model, requiring detailed disclosure documents for crypto asset admission to a trading venue. Issuers or trading venues must prepare these documents, outlining features, risks, rights, and underlying technology of the crypto assets. Liability for inaccuracies will rest with the preparer, necessitating adequate financial safeguards.
Trading venues and trading activities
Crypto asset trading venues will be regulated similarly to traditional trading platforms, emphasizing consumer protection, transparent access rules, and robust data reporting for market abuse monitoring. Overseas venues may need to establish UK subsidiaries unless equivalence arrangements are in place. Regulations governing trading activities will align with existing investment firm rules, which focus on consumer protection, conflict of interest management, best execution practices, and transparency in trading arrangements. Firms must also implement systems to detect and report market abuse.
Custody
The regime will adapt existing frameworks for safeguarding investments to include crypto assets, covering firms that safeguard cryptographic keys. Requirements will encompass asset segregation, accurate record-keeping, and strong governance controls. The policy note issued on 29th April 2025 clarifies that “specified investment crypto assets” such as tokenized securities will fall under the scope of digital asset rules for custody and safeguarding.
Lending platforms
Recognizing the risks in crypto lending, the framework will impose consumer protection measures, including clear disclosures and contractual terms. Prudential requirements will include liquidity and funding risk management. Differentiation between lending and staking activities is also being explored.
Prevention of market abuse
The regime will be based on the Market Abuse Regulation (MAR), addressing insider dealing, market manipulation, and unlawful disclosure. Trading venues will be responsible for detecting and preventing abuse, with requirements for Know Your Customer (KYC) procedures and blockchain analytics. All regulated firms must disclose inside information and maintain insider lists.
Call for evidence
The government seeks input on areas requiring further clarity, including Decentralized Finance (DeFi), crypto investment advice, post-trade activities, crypto mining, and sustainability concerns. These areas present unique challenges due to their evolving nature and the decentralized structure of certain crypto activities.
Stablecoins
Regarding stablecoins, HM Treasury will introduce new regulated activities for stablecoin issuance, ensuring appropriate safeguards and oversight by the FCA. However, the UK government has opted not to extend existing payment regulations to stablecoins unless they are under the control of a UK-based issuer, citing concerns about disproportionate regulatory burdens.
Next steps for implementation
The draft legislation has been issued as a statutory instrument, which will effectively amend the existing Financial Services and Markets Act to encompass crypto assets and the associated new rules. As such, it does not need to undergo a full parliamentary vote of the kind that would be required for primary legislation. The government has indicated that it intends to formalize the new rules by the end of 2025.
UK crypto market outlook
The UK shows an extremely favorable outlook for digital asset adoption. According to a recent report titled “Web3 & Crypto in France & Europe,” published by ADAN, Ipsos, and Deloitte, and sponsored by Wyden, 19% of Brits currently hold crypto assets – more than any other European country polled. The country also ranks twelfth for crypto adoption globally, according to TRM Research.
Due to the lack of clarity around the regulatory status of cryptocurrencies, UK banks have adopted a relatively cautious approach. However, there are positive signs of change. Even amid regulatory uncertainty, neobank Revolut has launched crypto trading within its app, and others, such as Monzo, refused to follow the lead of the major retail banks in blocking transactions to crypto exchanges. Now with regulation on the horizon, some UK financial institutions have already reversed this stance. For instance, Lloyds Banking Group permits transfers to recognized crypto exchanges.
These moves are likely to foreshadow further acceptance and adoption of digital assets once the new regulations come into force in 2026.
Launching a compliant CASP offering with Wyden
Wyden Infinity covers the entire end-to-end trade lifecycle of digital assets across all pre-trade, trade and post-trade use cases. It enables sell-side firms to build and maintain retail and institutional client offerings as well as internal prop-trading needs via a single platform, making Wyden Infinity the ideal choice for banks and brokers when building and scaling their fully compliant digital asset businesses.
A key advantage of the Wyden platform when considering the new FSMA rules is that it offers true best execution through market-wide connectivity to over 55 trading venues and a smart order routing system that carries out price comparisons and order splitting to achieve the optimal execution terms. Transparency is built into the system via real-time pre- and post-trade data, and Wyden’s standalone accounting system offers a fully auditable transaction trail.
Integration with custody partners, such as Copper, Ripple (formerly Metaco), and Fireblocks, also means Wyden maintains an auditable record of transaction flows between custody and trading with automated liquidity management solutions that ensure an uninterrupted trading experience. Core banking integrations ensure smooth reconciliation and support the assimilation of a new digital asset offering into established workflows.
Contact us today for an initial discussion about implementing a compliant digital asset offering in your organization.
Please note that the above article does not constitute legal advice.