How the UK Plans to Regulate Crypto Like Traditional Finance

Key takeaways

• The UK plans to bring cryptocurrency within the financial services perimeter by October 2027, shifting toward a structured regulatory regime.

• The Financial Conduct Authority has launched consultations to define standards and requirements for crypto firms, with final rules expected in 2026.

• The new framework marks a move away from basic Anti-Money Laundering registration toward a detailed licensing system that mirrors traditional financial products.

• Separately, the government has launched an independent review into foreign financial interference, which could lead to future restrictions on the use of cryptocurrency for UK political donations.

The United Kingdom is moving away from a “wait-and-see” approach toward a formal rulebook that closely resembles the framework used by high-street banks. HM Treasury and the Financial Conduct Authority (FCA) have set October 2027 as the target date for full implementation of the country’s new crypto regime. FHM TrIt represents a structured integration of digital assets into the UK’s financial services perimeter.

Evolution of the UK crypto regulatory framework

The UK has long taken a cautious stance on cryptocurrency. Until late 2025, most crypto activity in Britain was primarily governed by Anti-Money Laundering (AML) rules, financial promotions requirements and guidance from the FCA. This meant firms had to demonstrate robust AML controls to be added to the FCA’s register, but they were not subject to the full scope of the UK’s financial services rulebook.

This was not a full regulatory regime, as it did not address consumer protection, capital requirements or market oversight in the way banking or brokerage regulations do. There was also uncertainty around the treatment of trading platforms, staking, decentralized finance (DeFi) and other advanced crypto services.

The planned regulatory shift, due by 2027, marks a shift away from the previous patchwork approach. Instead of regulating crypto primarily through AML compliance, the UK intends to bring crypto activities within the core financial services perimeter, aligning them with the legal standards applied to traditional financial products.

Did you know? As of late 2025, around 50 crypto firms were registered with the FCA for AML purposes, though many applications were reported to have fallen short of the regulator’s expectations on governance and risk controls.

The new UK crypto policy roadmap

In December 2025, the UK government took a landmark step by laying the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025 before the UK Parliament for approval. This statutory instrument establishes the legal foundation for bringing a wide range of crypto activities within the scope of regulated financial services in the UK.

Under the regulations, implementation will take place in stages, building toward full commencement in October 2027. The measures expand the list of activities regulated under the Financial Services and Markets Act 2000 (FSMA) to include:

• Operating a crypto asset trading platform

• Dealing in crypto assets as principal or agent

• Arranging transactions and providing custody services

• Certain aspects of lending, borrowing and staking.

This legislative framework does not yet implement the full set of rules. Instead, it empowers the FCA to develop detailed regulations and introduce them as the regime comes into force. According to the government, these measures are intended to foster responsible innovation, strengthen consumer protection and improve market transparency, while preventing bad actors from exploiting regulatory gaps.

“By giving firms clear rules of the road, we are providing the certainty they need to invest, innovate and create high skilled jobs here in the UK,” said Rachel Reeves, adding that the goal is to protect millions of consumers while maintaining high standards across the market.

Importantly, these regulations were laid before parliament but were not yet in force as of December 2025. They form the core legal architecture that the FCA will use to develop conduct standards and obligations for industry participants.

The FCA’s new standards

With the regulatory framework in place, the FCA has launched a series of consultations to translate broad legal authority into practical, enforceable rules.

On Dec. 16, 2025, the regulator published three consultation papers outlining proposed regulatory approaches for crypto activities. These documents do not represent final rules. Stakeholder responses are due by Feb. 12, 2026, with final rules expected later in 2026, ahead of implementation in 2027.

The consultations include:

• CP25/40: Sets out operational requirements for trading platforms and brokers, introducing mandatory controls around staking services and certain DeFi-related activities to support market integrity.

• CP25/41: Requires token issuers to provide greater transparency about their projects and introduces a new Market Abuse Regime (MARC) aimed at addressing insider trading and price manipulation.

• CP25/42: Establishes prudential requirements by mandating that firms hold sufficient capital and liquidity to protect users and maintain system stability in the event of business failure.

These proposals aim to place crypto firms on a regulatory footing similar to that of traditional financial institutions, including governance standards, prudent operational risk controls, consumer duty obligations and market integrity requirements. The outcome of these consultations will determine the precise rulebook the industry must comply with once the regime takes effect.

New restrictions on UK political crypto donations

Separately from financial services regulation, UK lawmakers have turned their attention to the treatment of cryptocurrency in political finance. As of December 2025, crypto donations are not explicitly banned under UK political finance law. Guidance from the UK’s Electoral Commission treats crypto donations in the same way as other forms of donations, provided sufficient information is available to verify donor permissibility and value.

In December 2025, the UK government initiated a review into foreign financial interference, examining potential safeguards in political finance laws, including the use of cryptocurrency donations. The review may inform future policy recommendations and is expected to report by March 2026.

Concerns about the traceability of cryptocurrency donations have been raised by ministers and commentators, particularly where pseudonymous wallets may obscure the origin of funds. According to media reports citing government officials, future election reform legislation could include proposals to restrict political crypto donations, though any changes would require new primary legislation.