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 the UK.
Together with legislation from HM Treasury, the proposals form the backbone of a framework scheduled to 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 where the destination is clearer than ever – but still some way off.
“This is it for the UK,” Dea Markova, director of policy at crypto infrastructure firm Fireblocks, said in an interview. “This is the final regime for regulating the issuance and intermediation of cryptoassets.”
From discussion to definition
The latest consultations must be seen as part of a longer, carefully sequenced process, according to Sébastien Ferrière, a financial regulatory lawyer at Pinsent Masons.
For more than a year, the UK has been working through a regulatory roadmap that expands the FCA’s jurisdiction over crypto. The first step has been legislative: Financially defined regulated activities determine what falls within the perimeter. Only then can the FCA impose authorization requirements and detailed rules.
“Over the last year, things have really started to take shape,” Ferrière said. “We have been on a treadmill of consultations, but they now form a coherent framework.”
Previous phases focused on stablecoin issuance and custody, prudential requirements such as capital and resolution planning, and the application of existing FCA obligations – governance, systems and controls, operational resilience – to crypto firms. This week’s consultations are squarely on markets: trading platforms, intermediaries, staking, decentralized finance, concessions and disclosures, and crypto-specific market abuse rules.
Overall, Ferrière said, the FCA is trying to translate the architecture of traditional financial regulation to crypto markets while tailoring it to reflect the distinct risks of the technology.
A hybrid regulatory model
One of the most consistent design choices is the UK’s decision to extend existing financial services regulations to crypto, rather than writing a stand-alone rulebook from scratch, as the EU did with its Markets in Crypto-Assets (MiCA) regulation.
That distinction is important, but not in a simplistic way. Ferrière described FCA’s approach as a hybrid. Cross-cutting obligations – principles of integrity, conflict management and fair treatment of customers – are applied largely as they are. However, market-facing rules are being written specifically for crypto.
“There is a new admissions and disclosure regime and a new market abuse regime,” Ferrière said. “They’re not just lifting the securities rules and applying them wholesale. They’re reflecting the existing framework, but they’re being drafted to reflect the parameters of cryptoassets and cryptoservices.”
The regulator, he added, is walking a tightrope. Being more lenient than in traditional markets would invite criticism that crypto receives preferential treatment. Being more restrictive can push activity offshore. The stated goal is “same risks, same results,” even if the mechanics are different.
Second-mover advantage and its limits
For Markova, Britain’s most important asset is timing. By moving behind the EU and in the middle of the ongoing debate in the US, the UK has been able to observe how regulatory decisions play out in practice.
“The UK is very proactively trying to learn from other jurisdictions,” she said. “You can see that in the proposals and in the political narrative.”
That narrative matters, Markova argued, because many decisions faced by banks and asset managers integrating crypto services are ultimately risk assessments made in areas where the law is not black and white. A supportive political background leads to different outcomes than those dominated by fear of enforcement.
She also pointed to several areas where the UK has deviated from EU precedent, including explicit treatment of staking, lending and borrowing, and a more pragmatic recognition that crypto-liquidity is global rather than tied to national venues.
The unresolved pressure points
Despite the progress, there are still significant uncertainties – especially around stablecoins and DeFi.
Regarding stablecoins, Markova said policymakers have recognized the need to distinguish between payments and investments and avoid the trap of regulating traders as financial intermediaries simply for accepting digital tokens. But deeper questions remain unanswered: how foreign-issued stablecoins will be treated relative to sterling-denominated ones, what due diligence obligations will fall on platforms, and how conservative settlement policy may affect adoption.
DeFi poses an even more difficult conceptual challenge. The FCA has signaled that sufficient centralized activity will be regulated as traditional brokerage. But many DeFi services are non-liberty-depriving by design.
“Identifying a responsible entity and applying a custodial sentence does not always address the actual 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 big picture as proportionality. The FCA insists it wants a competitive, innovative market, but the cumulative burden of conduct rules, operational resilience standards and capital requirements will shape how attractive the UK is to global businesses.
“It’s too early to make a definitive call,” Heffron said. “But this is a significant market and I would be surprised if international operators did not want access to UK liquidity.”
Ferrière highlighted another issue likely to grow in importance: extraterritorial reach. Determining what constitutes “operating in the UK” is already complex in traditional finance. In crypto – inherently global and digital – companies can find themselves within the regulatory perimeter sooner than expected, forcing decisions about geo-blocking, restructuring or establishing a UK presence.
What success would look like
From the FCA’s perspective, success would mean more informed investors, reduced market abuse, greater confidence and sustainable competition. New admission and disclosure rules aim to standardize information about cryptoassets, while market abuse provisions aim to address manipulation and information asymmetries – both prerequisites for deeper institutional participation.
The cost is compliance and the scheme is expressly not designed to eliminate risk. Instead, it seeks to ensure that participants engage in crypto markets with clearer information and stronger safeguards.
For now, the UK has crossed an important threshold: moving from endless “frameworks” to a concrete legislative end state. Whether its second-mover strategy provides a competitive advantage – or simply delays clarity – will become clear as companies decide whether to build for Britain’s crypto future before 2027.
