Cryptoasset firms to be brought within the scope of the UK regulatory perimeter

Introduction

On 29 April 2025, HMT published the Draft Instrument and a policy note for the regulation of certain activities relating to cryptoassets and stablecoins. This comes hot on the heels of the publication of the UK Financial Conduct Authority (FCA) cryptoassets roadmap, and discussion paper relating to the creation of a new UK tailored cryptoassets regime.  

The UK is somewhat behind the European Union, which has already established a tailored regime for cryptoassets activities through the Markets in Crypto-Assets regulation (MiCA), which came into force on 30 December 2024.

The UK chancellor Rachel Reeves has confirmed that the UK intends to will work closely with counterparts in the U.S. to encourage and facilitate “responsible regulation of digital assets”. The UK regime is expected to be further developed during the course of 2025 with the publication of consultation papers, policy statements and final rules. The regime is expected to “go live” during 2026.

At a glance

The new regime will bring crypto issuers, exchanges, dealers, agents and stakers within the scope of the existing financial services regulatory perimeter by creating new categories of:

• specified investments which will capture qualifying cryptoassets, qualifying stablecoins and specified investment cryptoassets (eg a token on a blockchain that represents an interest or right to an equity, or bond, or a derivative); and

• specified activities, which will capture issuances, custody services, operators of trading platforms, principal, and agency trading, arranging, and persons engaging in staking activities.

This means that persons conducting these new cryptoasset regulated activities (Cryptoasset Firms) will be required to be authorised by the UK Prudential Regulation Authority (PRA) and/or the FCA for the purposes of section 19 of Financial Services and Markets Act 2000 (FSMA) unless an exemption applies.   

The regime has extra-territorial application in the sense that it will not only apply to Crypotasset Firms that are physically located in the UK but also to firms located outside the UK that conduct some of the new cryptoasset activities with UK retail customers unless acting with and through certain types of UK authorised intermediaries, serving only UK institutional customers, or where an exemption applies. 

The Draft Instrument includes provisions to empower the PRA and the FCA to develop rules and guidance. The specific rules and regulations that will apply to Cryptoasset Firms will therefore continue to be developed by the PRA and FCA during the course of 2025. These will apply to Cryptoasset Firms when conducting the new cryptoasset activities and are likely to...