UK Releases Draft Crypto Legislation Targeting Exchanges and Stablecoins

The United Kingdom has introduced draft legislation to regulate its growing cryptocurrency sector, as announced by His Majesty’s Treasury on April 29, 2025. The proposed rules, designed to strengthen consumer protections and improve market integrity, will bring crypto exchanges, dealers, and stablecoin issuers under the supervision of the Financial Conduct Authority (FCA). The Treasury outlined that the framework responds to the increasing use of digital assets, with 12% of UK adults now holding crypto, up from 4% in 2021.

The draft builds on groundwork laid by a 2023 Treasury consultation, which proposed integrating a broad range of cryptoasset activities—such as operating exchanges and providing custody services—into the UK’s financial services regulatory framework. The draft designates operating a crypto trading platform and issuing stablecoins as regulated activities. Firms serving UK customers will need to comply with FCA standards on transparency, operational resilience, and fraud prevention, akin to traditional financial entities. The legislation is expected to “crack down on bad actors while supporting legitimate innovation,” the Treasury stated in its release. Additional measures include regimes for admissions and disclosures to curb market abuse. The Treasury has opened the draft for technical feedback until May 23, 2025, with final legislation anticipated after industry input. Reuters noted that these rules tie into a broader Financial Services Growth and Competitiveness Strategy, set for further elaboration on July 15, 2025, during Chancellor Rachel Reeves’ Mansion House speech. Reeves recently discussed potential UK-U.S. digital asset collaboration with U.S. officials, hinting at a cross-border sandbox.

The UK’s efforts coincide with global regulatory developments. The EU’s Markets in Crypto-Assets (MiCA) framework was fully implemented by December 2024, while the U.S. continues its own regulatory debates. The official announcement emphasized that the UK’s approach seeks to ensure compliance without stifling growth, a point Reeves underscored at a London fintech summit: “Britain is open for business—but closed to fraud, abouse, and instability.”

Industry observers suggest the rules could bolster confidence among institutional investors, though compliance costs may pose challenges for smaller firms. The FCA is slated to begin authorizing crypto businesses in 2026, a move that could reshape the UK’s $1 trillion financial services landscape.