New Cryptocurrency Regulations in the UK: Non-British Stablecoin Providers Exempted from Regional Oversight
UK Announces Draft Crypto Regulations, Aiming for Balance between Innovation and Consumer Protection
The United Kingdom has unveiled a comprehensive draft regulatory framework for cryptoasset trading platforms, intermediation, lending, borrowing, staking, stablecoin issuance, and custody services. The Financial Conduct Authority (FCA) will primarily govern this new regime, with the Bank of England coordinating certain aspects.
The draft legislation, published in April 2025, brings crypto platforms, DeFi, and lending within the FCA’s regulatory remit. Key details include the introduction of the ‘Travel Rule’ for customer information sharing (Sep 2023) and a crypto financial promotions regime (Oct 2023).
The FCA has proposed specific rules on stablecoins and crypto custody, aiming to ensure asset backing transparency, financial resilience of firms, and integration with UK payment systems. The draft framework plans to roll out final rules in 2026, following industry feedback.
Staking, one of the novel activities, is covered in the draft regulations. However, foreign providers that don’t interact directly with UK consumers might not need to register. Foreign crypto entities that only engage indirectly with UK consumers via a regulated trading platform or dealer will not need to be regulated, either.
Certain crypto providers will fall outside the regulatory perimeter, including foreign stablecoin issuers. Crypto custodians, including those who provide custody of tokenized securities, must be regulated.
The UK aims to create a more predictable and streamlined regime consolidated under the FCA, aligning broadly with international standards but intending to maintain fintech leadership through faster, clearer authorizations and oversight. The UK is collaborating with the United States in a joint working group to support the growth of digital assets.
The draft regulations do not cover truly decentralized finance (DeFi) activities, but there’s a caveat about determining whether there’s a “sufficiently controlling party or parties”. Stablecoins can still be used for payments under the draft crypto regulations.
HM Treasury is seeking feedback on the draft regulations by 23 May 2025. Beyond crypto, for digital securities, the UK wants to embrace Commissioner Peirce’s proposal of transatlantic collaboration for the UK’s Digital Securities Sandbox. Foreign crypto entities that only engage with institutions, provided those institutions aren’t acting as intermediaries to UK consumers, will not need to register.
The UK's draft crypto regulations propose a centralized and structured framework under the FCA, aiming to both safeguard markets and enable innovation with explicit stablecoin rules and broader crypto activity regulation. This contrasts with the US approach that involves multiple regulators seeking to modernize securities laws with a focus on clarifying asset classifications but still grappling with jurisdictional overlaps. Both jurisdictions expect key regulatory milestones and final rules around 2026, reflecting a global trend toward formalized, mature crypto regulation.
During a recent visit to the US, Rachel Reeves, Chancellor of the Exchequer, discussed the topic with US Treasury Secretary Bessent. The UK government has shown its commitment to fostering international cooperation in digital asset regulation.
- The UK government, through the Financial Conduct Authority (FCA), has proposed specific rules on stablecoins and crypto custody within a new regulatory framework for cryptoasset trading, aiming for a balance between innovation and consumer protection.
- Foreign providers that don't interact directly with UK consumers might not need to register under the draft UK regulations, but crypto custodians, including those who provide custody of tokenized securities, must be regulated.
- The UK's draft crypto regulations cover staking as one of the novel activities, and certain foreign crypto entities that only engage indirectly with UK consumers via a regulated trading platform or dealer will not need to be regulated.
- The UK plans to create a more predictable and streamlined regime consolidated under the FCA, aligning with international standards while maintaining fintech leadership through faster, clearer authorizations and oversight.
- During a recent visit to the US, Rachel Reeves, Chancellor of the Exchequer, discussed digital asset regulation with US Treasury Secretary Bessent, reflecting the UK government's commitment to fostering international cooperation in this area.
