UK releases draft legislation for regulating crypto assets –

The UK government has this week released draft legislation for regulating cryptoassets such as bitcoin.

Its publication was announced by chancellor Rachel Reeves in a keynote speech at the Innovate Finance Global Summit (‘IFGS 2025’ – 29 April), an annual event in the City of London that convenes policymakers and the private sector to discuss fintech trends.

The draft legislation arrives following an HM Treasury consultation in 2023 that proposed bringing a wide range of cryptoasset activities, including crypto exchanges and custody services, within the UK’s financial services regulatory perimeter.

“I’m delighted that we are today publishing draft legislation for the UK’s comprehensive regulatory regime for cryptoassets, engaging with all of you to ensure that the final legislation – planned for later this year – delivers for government and most importantly for the industry, and makes the UK a great place for digital asset companies to invest and innovate,” Reeves said her speech.

The UK has lagged the European Union (EU) – which the country left in January 2020 – in regulating crypto. The 27-member bloc’s landmark Markets in Crypto-Assets (MiCA) regulation (also abbreviated to MiCAR) came into full force in December 2024.

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Crypto on the rise

Twelve per cent of UK adults owned crypto in 2024, up from four per cent in 2021, according to research by the UK’s Financial Conduct Authority (FCA), released in November last year. The average value of crypto held by people was £1,842 (about $2,460).

The government states that its plans ‘support innovation while cracking down on fraudsters’ and that the legislation will ‘better protect millions of people across Britain’.

‘Too often, consumers have been left exposed to risky firms and scams,’ the government states in an announcement summarising the draft rules (‘New cryptoasset rules to drive growth and protect consumers’).

‘Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter — cracking down on bad actors while supporting legitimate innovation,’ the government states. ‘Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection, and operational resilience — just like firms in traditional finance.’ 

The draft legislation itself (‘Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025’ – 27 pages) is published alongside a ‘Future financial services regulatory regime for cryptoassets (regulated activities) – Policy Note’ document (19 pages). HM Treasury’s deadline for ‘technical comments’ on the draft statutory instrument is 23 May.

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Transatlantic relations

In her speech Reeves referenced recent interactions with politicians in the US, where Donald Trump signed an executive order three days into his second term as president titled ‘Strengthening American Leadership in Digital Financial Technology’. Trump wants to make the US the ‘crypto capital of the world.’

“For the UK to be a world-leader in digital assets, international cooperation is vital,” Reeves told the audience at the Guildhall. “Which is why I discussed continued US and UK engagement with [Treasury] Secretary [Scott] Bessent last week [in Washington DC], including further dialogue at the upcoming UK-US Financial Regulatory Working Group in June to support the use and responsible growth of digital assets, maintaining the deep historic relationship between the world’s two largest financial centres through this period of significant technological change.”

The FCA and Bank of England opened a sandbox for firms innovating in financial market infrastructures in September 2024. The Digital Securities Sandbox (DSS) has been created to enable regulators to curate the take-up of digital asset technology in financial markets. It effectively ushers in a ‘test’ regulatory regime for companies to use digital infrastructure such as distributed-ledger technology (DLT) to issue, trade and settle securities in a ‘live’ setting, and will also enable the authorities themselves to hone regulation.

US Securities & Exchange commissioner Hester Peirce proposed a cross-border digital securities sandbox between the US and UK last year (29 May 2024). 

Reeves said in her speech that she and Bessent had discussed how both countries’ officials could “explore opportunities to support industry to innovate cross-border, in line with” Peirce’s proposal (which she specifically referenced) “potentially allowing greater digital collaboration between capital markets in New York and London.”

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Pensions, PISCES and more

Significantly broader current UK government priorities with fintech relevance include the ‘Invest 2035: the UK’s Modern Industrial Strategy’ (published in October 2024), which identified financial services as one of eight ‘growth-driving’ sectors; and the development of a ‘Financial Services Growth & Competitiveness Strategy’. Fintech is among five ‘priority growth opportunities’ on which the latter strategy will focus (the other four are: sustainable finance; asset management and wholesale services; insurance and reinsurance; and capital markets).

Reeves said that the Financial Services Growth & Competitiveness Strategy would be published to coincide with a Mansion House speech (formal address at the Lord Mayor of London’s official residence) on 15 July.

Other forthcoming fintech-relevant initiatives mentioned by Reeves in her speech included the Pension Investment Review (which she herself announced in July 2024): a final report will be published “soon” ahead of the introduction of a Pension Schemes Bill, through which the government will legislate “to unlock up to £80 billion [about $107bn] of investment into companies.”

Separately, “for those companies who want to remain private for longer”, Reeves also referenced a ‘Private Intermittent Securities and Capital Exchange System’ (‘PISCES’) for which the government will legislate next month (May). She described PISCES as “a brand new type of stock exchange for trading private company shares, supporting private companies to scale and grow and providing a steppingstone to IPO [initial public offering]”.