The United Kingdom has always been a global hub for financial innovation and in more recent years, crypto assets have become an increasingly important part of that. However, with innovation comes risk and when risk is involved in anything financial, usually comes regulation.
While cryptocurrency was once seen as the “wild west” of the financial markets, the UK’s approach to working on cryptocurrency regulation has matured rapidly in recent years.
In todays blog we are going to explore how cryptocurrency is regulated in the UK, what changes you are likely to see in the near future and what all this means for investors, traders, businesses and the UK economy as a whole.
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How does the UK currency regulate cryptocurrency?
Unlike more traditional financial services, cryptocurrency (such as Bitcoin, Ethereum etc) are not fully included in the UK’s regulatory framework, not quite yet anyway. That being said, there are specific areas where regulation already applies. These are as follows;
– Anti-Money Laundering (AML) & Counter-Terrorist Financing: Since January 2020, all UK based crypto businesses, including exchanges, wallet providers and some DeFi platforms must register with the Financial Conduct Authority (FCA) and prove they are complying with the anti-money laundering and counter-terrorist financing rules.
Businesses are required to perform Know Your Customer (KYC) checks, monitor user transactions for suspicious activity, reporting any concerning transactions to the authorities. This framework is designed to prevent people using cryptocurrency for illegal purchases, rather than to protect customers from the risks surrounding the crypto space.
– Financial Promotions: Ever since October 2023, the rules and regulations around crypto promotions have been significantly tightened. Under the new laws, firms that are wanting to promote crypto-based assets must be either FCA-authorised or have all of their promotions approved by an authorised firm.
The FCA is particularly worried about misleading advertising and has introduced requirements to try and combat this. These include mandatory risk warnings such as “Don’t invest unless you are prepared to lose all your money” and “cooling off” periods for first time investors.
Any business that is found breaking these rules can find themselves subject to hefty fines or even criminal charges.
– Regulation of Crypto Derivatives: While the “spot market” for cryptocurrency (the buying and selling tokens directly) still remains mostly unregulated in 2025, the FCA has banned the sale of crypto derivatives and exchange-traded notes (ETNs) to retail customers since January 2021.
The FCA gave the reasoning behind this as there are “high risks of unexpected losses” and the “extreme volatility” of the crypto markets. They put this in place to protect retail investors who may not full understand the risks that are involved.
What’s next for crypto regulation in the UK?
While the UK is currently focusing on protecting customers in the crypto space and preventing crypto’s being used to aid financial crime, the UK government has made it clear that broader regulations are to be expected soon.
– Fully regulated crypto assets: During early 2023, HM Treasury published a consultation paper outlining a plan for a comprehensive regulatory framework for crypto-based assets. They aimed to treat cryptocurrency like any of the traditional financial services.
The main parts of this report included bringing all crypto exchanges, custodians and related platforms into the financial regulatory perimeter. They also wanted to apply the same high standards expected of traditional financial institutions to anyone operating within the crypto space.
A further issued raised by the report was clear rules needing to be set out for how stablecoins should be issued and backed, especially if they are to be considered to be used for making payments. This move reflects a growing concern from multiple governments around the world that poorly managed stablecoins could pose a threat to financial stability.
– Possible future for DeFi and NFTs: The UK government is also keeping a watchful eye on developments in decentralised finance and non-fungible tokens (NFTs).
While there are no current plans that we know of to regulate DeFi protocols or NFTs in the same way as regulate cryptocurrency, the government has not ruled it out in the future. It is widely expected that they are likely to act on these at some point so they are better able to protect the everyday users of these aspects of digital assets.
What does this mean for cryptocurrency in the UK?
For any crypto-based business in the UK the way things are going is clear. Regulation is coming, or being improved upon. The standards are going to get a lot tougher to meet.
For the long-term survival of cryptocurrency, many in the industry are welcoming these changes. Clearer rules will help to build public trust in the crypto space and attract more investors.
However, smaller businesses in the space may struggle to meet the costs and complexity of the new regulation, leader to further consolidation in the sector.
For customers and investors, the crypto space in the UK is starting to look a little more reassuring. Stronger regulations should mean better protections and transparency and more importantly, more accountability. All of this could help move cryptocurrency further into the spotlight and further into the financial mainstream.
Crypto Analyst‘s Final Thoughts.
The UK is currently at an important crossroads in its crypto journey. While the government wants the UK to be a global “crypto hub” it is determined to achieve this in a way that protects the customers, maintains financial stability and keeps the country’s reputation for financial excellence in tact.
The new few months, even years are going to be crucial in seeing whether the UK can make this happen and find the right balance that keeps everyone involved in the crypto space happy, and more importantly safe without compromising the values that attract people to cryptocurrency in the first place.
For anyone who is currently involved with cryptocurrency, this is one to watch and watch closely. Things can change quickly and can have bit effects on the future and value of everything within the crypto space.