Key dealers
- The United Kingdom introduced draft legislation to regulate crypto assets aimed at consumer protection and increase investors’ trust.
- Crypto companies in the UK will have to follow legislative standards for openness and operational resilience similar to traditional financial units.
The British government has published legislation To regulate crypto assets such as Bitcoin and Ethereum, which aim to protect consumers and increase investors’ confidence in the midst of growing crypto adoption.
The proposed rules, which were presented during the UK’s fintech week by Chancellor Rachel Reeves, form part of the government’s broader plan for change agenda, which aims to position the UK as a global hub for fintech and responsible digital asset innovation.
Under the new framework, crypto companies that offer services such as exchanges, custody and brokers for crypto assets must meet robust standards for openness, consumer protection and operational resilience – standards that are currently applied to traditional financial institutions.
“Through our change of change, we make Britain the best place in the world to renew – and the safest site of consumers. Robust rules on crypto will increase investors’ trust, support the growth of fintech and protect people across the UK,” Chancellor Reves said.
The legislation aims to deal with the sharp increase in the adoption of crypto in the UK, where 12% of adults now own digital assets, up from just 4% in 2021. However, this growth has exposed thousands of consumers to risky, unregulated platforms and fraud.
For the first time, the new rules will place exchanges and intermediaries that handle digital assets under the UK regulatory authority. This will give supervisory authorities the tools to target bad actors while promoting responsible innovation through clear, enforceable standards.
What to know about the new frame
The British government’s recently published draft legislation introduces a series of legal definitions and regulated activities designed to provide clarity, consumer protection and market integrity.
According to the proposed framework, crypto service providers must for the first time be approved by the Financial Conduct Authority (FCA) to carry out important activities.
These include operating a crypto access trading platform, issuing Stablecoins in the UK, protecting digital assets on behalf of customers, facilitating crypto trading or lending as principal or agent and providing striking services.
Stablecoins, if supported by Fiat currency or assets, are also entered in the fold, even if the government has confirmed that it will not yet regulate them under existing payment laws.
It is important that the regime will apply to companies based abroad if they offer services to British retail customers. Although institutional friendships may be exempt in some cases, all companies that trade directly or indirectly with UK consumers will be required to ensure authorization in the UK.
The legislation also includes transitional arrangements, which gives existing companies time to apply and, if necessary, reveal their operations in an orderly if permit is not granted.
The framework also addresses long -term issues regarding decentralized funding (Defi). Although there are no specific provisions that are focused on defi protocols, FCA will assess on a case-by-case basis if a sufficiently centralized unit conducts regulated activities.
Transatlantic cooperation on digital asset growth
In addition to domestic reforms, Britain strengthens its international regulatory ties.
Kansler Reeves revealed that the United Kingdom is involved in the United States through the British financial regulation working group to support the responsible growth of digital assets.
The announcement follows talks at high levels in Washington between the Chancellor Reeves and US Finance Minister Scott Bessent. Discussions included proposals from US SEC Commissioner Hester Peirce for a transatlantic regulatory sandbox, which would enable companies on both sides of the Atlantic to collaborate on developing compatible digital securities solutions.
Collaboration is seen as an important step towards harmonizing international standards, reducing fragmentation and encouraging responsible innovation between jurisdictions.
The government plans to publish its first strategy for financial services and competitiveness on July 15 and identifies fintech as a priority sector. The final crypto legislation will be introduced “at the earliest occasion”, following the industry consultation on the draft provisions.
