The UK’s long-promised crypto regulatory regime moved closer to reality this week, as the Financial Conduct Authority (FCA) unveiled its consultation that will ultimately define how crypto firms operate in Britain.
Together with HM Treasury legislation, the proposals form the backbone of a framework that will come into force in October 2027. For policymakers, the aim is to balance growth and innovation with market integrity and consumer protection. For the industry, the challenge is to navigate an 18-month transition period in which the destination is clearer than ever, but still some distance away.
“This is it for the UK,” Dea Markova, policy director at crypto infrastructure company Fireblocks, said in an interview. “This is the definitive regime to regulate the issuance and intermediation of cryptoassets.”
From discussion to definition
The latest consultations should be considered part of a longer and carefully sequenced process, according to Sébastien Ferrière, financial regulation lawyer at Pinsent Masons.
For more than a year, the UK has been working on a regulatory roadmap expanding the FCA’s jurisdiction over cryptocurrencies. The first step has been legislative: the regulated activities defined by the Treasury determine what falls within the perimeter. Only then will the FCA be able to impose authorization requirements and detailed rules.
“Over the last year, things have really started to take shape,” Ferrière said. “We have been in a series of consultations, but they are now forming a coherent framework.”
Previous phases focused on the issuance and custody of stablecoins, prudential requirements such as capital and liquidation planning, and the application of existing FCA obligations (governance, systems and controls, operational resilience) to crypto companies. This week’s queries are aimed squarely at the markets: trading platforms, intermediaries, staking, decentralized finance, admissions and disclosures, and market abuse rules specific to cryptocurrencies.
Taken together, Ferrière said, the FCA is attempting to transpose the architecture of traditional financial regulation to crypto markets, while adapting it to reflect the different risks of the technology.
A 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 writing a separate rulebook from scratch as the European Union (EU) did with its Markets in Crypto Assets (MiCA) regulation.
That distinction matters, but not in a simplistic way. Ferrière described the FCA’s approach as hybrid. The cross-cutting obligations (principles of integrity, conflict management and fair treatment of customers) are being implemented largely as they are. However, market-facing rules are being written specifically for cryptocurrencies.
“There is a new regime of admissions and disclosures and a new regime of market abuse,” Ferrière said. “They are not simply removing the rules for securities and applying them wholesale. They echo the existing framework, but are written to reflect the parameters of cryptoassets and cryptoservices.”
The regulator, he added, is walking a tightrope. Being more permissive than in traditional markets would spark criticism that cryptocurrencies are receiving preferential treatment. Being more restrictive could boost activity abroad. The stated goal is “same risks, same outcomes,” even if the mechanisms differ.
The second player advantage and its limits
For Markova, the United Kingdom’s most important asset is time. Following the EU and amid the ongoing debate in the United States, Britain has been able to watch how regulatory decisions play out in practice.
“The UK is very proactively trying to learn lessons from other jurisdictions,” he said. “That can be seen in the proposals and in the political narrative.”
That narrative is important, Markova argued, because many decisions facing banks and asset managers integrating crypto services are ultimately risk judgments made in areas where the law is not black and white. A favorable political context leads to different outcomes than one dominated by fear of law enforcement.
He also noted several areas where the UK has departed from EU precedent, including explicit treatment of betting, lending and borrowing, and a more pragmatic recognition that crypto liquidity is global rather than tied to national spaces.
Unresolved pressure points
Despite progress, significant uncertainties remain, particularly around stablecoins and DeFi.
Regarding stablecoins, Markova said policymakers have recognized the need to distinguish between payments and investments, avoiding the pitfall of regulating merchants as financial intermediaries simply for accepting digital tokens. But deeper questions remain unanswered: how foreign-issued stablecoins will be treated relative to those denominated in sterling, what due diligence obligations will fall on platforms, and how a conservative settlement policy could impact adoption.
DeFi poses an even more difficult conceptual challenge. The FCA has indicated that sufficiently centralized activity will be regulated like traditional intermediation. But many DeFi services are non-custodial by design.
“Identifying a responsible entity and applying an escrow framework does not always address the real risk,” 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 general test as proportionality. The FCA insists it wants a competitive and innovative market, but the cumulative burden of conduct rules, operational resilience standards and capital requirements will determine the UK’s attractiveness to global businesses.
“It’s too early to make a definitive decision,” Heffron said. “But this is an important market and I would be surprised if international traders did not want to access UK liquidity.”
Ferrière highlighted another issue that is likely to gain importance: extraterritorial reach. Determining what constitutes “operating in the UK” is already complex in traditional finance. In the inherently global and digital crypto sector, companies may find themselves within the regulatory perimeter sooner than expected, forcing decisions about geo-blocking, restructuring or establishing a UK presence.
What would success look like?
From the FCA’s perspective, success would mean more informed investors, less market abuse, greater trust and sustainable competition. The new admission and disclosure rules aim to standardize information on cryptoassets, while market abuse provisions aim to address manipulation and information asymmetries, both prerequisites for deeper institutional involvement.
The cost is compliance, and the regime is not explicitly designed to eliminate risk. Instead, it seeks to ensure that participants interact with crypto markets with clearer information and stronger safeguards.
For now, the UK has crossed an important threshold: moving from endless “frameworks” to a concrete regulatory end state. Whether its second-step strategy offers a competitive advantage, or simply delays clarity, will become clear as companies decide whether to build for the UK’s crypto future before 2027.
