United Kingdom: Developments on the financial services regulatory regime for cryptoassets

On 29 April 2025, HM Treasury published the following documents in relation to the creation of a UK financial services regulatory regime for cryptoassets, including stablecoins:

• The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 - Draft SI (the SI); and

• Future financial services regulatory regime for cryptoassets (regulated activities) - Policy Note (the Policy Note).
  See also the HM Treasury press release.

In particular, the draft SI and accompanying Policy Note propose the below amendments.

Amendment to the UK Regulated Activities Order

The draft SI amends the UK Regulated Activities Order (RAO) to create new categories of specified investments and associated new specified activities for cryptoassets. In particular, this includes:

• A number of new definitions, including definitions of qualifying cryptoassets and qualifying stablecoin, as the principal classes of cryptoassets to which the amendments apply, and classifying these cryptoassets as specified investments under the Financial Services and Markets Act 2000 (FSMA);
• Specifying certain activities related to these assets as regulated activities, such that persons carrying on those activities need to be authorised for that activity by the FCA (unless an exclusion/exemption applies). These activities include:

  • Stablecoin issuance;

  • Safeguarding (or custody) of qualifying cryptoassets;

  • Operating a qualifying cryptoasset platform;

  • Dealing in qualifying cryptoassets as principal (to also capture cryptoasset lending and borrowing services) and as agent;

  • Arranging deals in qualifying cryptoassets (including the operation of a cryptoasset lending platform);

  • Qualifying cryptoasset staking;

• Amending FSMA as a consequence of the RAO amendments, in particular to set the geographic perimeter for the new regulated activities.

Geographic Perimeter

The Policy Note provides additional discussion on the geographic perimeter of the new regime as follows:

• For the activities of operating a qualifying cryptoasset trading platform, dealing in qualifying cryptoassets as principal, dealing in qualifying cryptoassets as agent, and arranging deals in qualifying cryptoassets, firms that are dealing directly or indirectly with a UK consumer will need to be authorised in the UK regardless of whether the firm is based in the UK or overseas. Where a firm is dealing with a UK consumer through an intermediary, they will not need to be authorised if the intermediary is a firm authorised to operate a qualifying cryptoasset trading platform or deal in qualifying cryptoassets as principal;
• Overseas cryptoasset firms carrying on the above activities but serving only UK institutional customers will not be required to be authorised, assuming those institutional customers are not acting as an intermediary between the overseas cryptoasset firms and UK consumers;
• Firms will need to be authorised in the UK if they are carrying on safeguarding and qualifying cryptoasset staking activities in the UK or on behalf of a consumer in the UK (other than where the firm is doing so at the direction of a person who is themselves authorised to carry on that activity);
• For firms issuing qualifying stablecoin, they will only be required to be authorised if they are carrying on the activity of issuing qualifying stablecoin from an establishment in the UK.

Other amendments

Other proposed amendments include:

• Amending the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 to apply FSMA’s regulatory framework to that included in the RAO. Note that this includes removing the current provisions allowing cryptoassets firms that are registered with the FCA under the MLRs to approve their own financial promotions;
• Making consequential amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to reflect the new regulatory perimeter;
• Making further consequential amendments to ensure that ‘Qualifying stablecoin’ backing assets are not considered either an alternative investment fund or collective investment scheme and that there is a clear distinction between qualifying stablecoin and tokenised deposits and electronic money.

DeFi

The Policy Note sets out that the draft SI does not include special provisions for decentralised finance models. Where specified activities are being undertaken on a truly decentralised basis (i.e., where there is no person that could be seen to be undertaking the activity by way of business), then requirements to seek authorisation will not be applicable. The FCA will determine in any given case whether there is a sufficiently controlling party or parties that ought to be subject to the requirement to be authorised.

Next Steps

HM Treasury welcomes any technical comments on the SI by 23 May 2025 and intends to legislate for the new cryptoasset regulatory regime by the end of 2025. On commencement of the SI, the UK regulators will be able to issue directions, guidance and rules, with full commencement beginning later.

The FCA will be required to set a period prior to full commencement of the regime to allow firms to submit advance applications for authorisation. Transition arrangements may also apply, including a wind-down period of a maximum of 2 years for existing firms who fail to acquire the relevant permission.