On April 29 2025, the chancellor announced the publication of the draft UK legislation for regulating cryptoassets. The industry has been waiting for this confirmation of the scope of the extension to the regulatory regime following a consultation and feedback in 2023.
This enables the Financial Conduct Authority, which will regulate the new cryptoasset activities, to continue with its roadmap of discussions and consultations about the rules to apply to regulated firms and how to apply for authorisation. The FCA duly published a discussion paper on regulating cryptoasset activities on May 2 2025.
The draft legislation covers amendments primarily to the Regulated Activities Order. That is the statutory instrument setting out the activities where authorisation is required in the UK when carried out in relation to specified investments which are listed there.
Importantly, it also contains a number of exclusions.
Unlike the European markets in cryptoassets (MiCA) regime, the UK is amending its existing framework to include cryptoassets, rather than creating a standalone regime.
Most of the new activities are similar to existing ones relating to traditional investments but, instead, apply to qualifying cryptoassets. These are cryptoassets which are fungible and transferable, including stablecoins but not cryptoassets that are already specified investments.
A wide universe
This will capture a wide universe of cryptoassets including the decentralised ones such as bitcoin and ether.
The activities in this group are operating a cryptoasset trading platform (CATP) and being a cryptoasset intermediary by dealing as principal or agent, or arranging (where dealing as principal and arranging include lending and borrowing).
Interestingly, these particular activities benefit from a number of exclusions, some of which replicate their traditional finance equivalents but several of which cater specifically for features special to cryptoassets.
These activities will be regulated when carried out both in and outside the UK, when the person doing them is directly or indirectly involved in the sale or subscription of a qualifying cryptoasset to a consumer in the UK and there is no authorised person acting as an intermediary.
The FCA discusses all these activities and the types of rules it is considering applying to those who undertake them in some detail in the discussion paper.
The discussion is led by the FCA’s aims for the new regime, the need to manage identified risks and the logic behind the rules in the traditional finance version.
Tailored safeguarding
The FCA is clear about where it may be less open to changes — such as its restriction on firms accepting credit from consumers to pay for cryptoassets. However, the FCA is open to exploring alternative solutions in most cases.
The other fairly familiar new activity is safeguarding, although it has been tailored to the cryptoasset context and is different from the traditional regulated activity in several ways.
Safeguarding here means where a custodian has the authority to transfer the benefit of a cryptoasset to another person and it does not involve administering.
It covers safeguarding of not only qualifying cryptoassets, but also cryptoassets that are regulated securities and derivatives, so that the latter can also benefit from rules designed to address specific risks associated with digital asset technologies.
This activity will require regulation when carried on in the UK or on behalf of a consumer in the UK unless one of several exclusions applies.
There is a brand new activity of making arrangements for qualifying cryptoasset staking.
Cryptoasset staking is the use of a qualifying cryptoasset in blockchain validation, which is the validation of transactions on a blockchain or network that uses distributed ledger technology — or similar — and involves proof-of-stake consensus mechanisms such as the ethereum blockchain.
High-risk activity
This is seen as a fairly high-risk activity, particularly for retail clients and was often seen as inadvertently involving the operation of a collective investment scheme until HM Treasury clarified that late last year.
Regulating staking in its own right will enable the FCA to create rules that make sense for the unique activity rather than trying to shoehorn them into an activity intended for funds.
Its key proposals seek to address technological risks in staking and safeguarding and to improve consumer understanding.
Last but not least is issuing qualifying stablecoins. These are qualifying cryptoassets that reference a fiat currency, potentially with other assets, but do not include tokenised deposits or tokenised e-money.
A person who is established in the UK and has created a qualifying stablecoin — or had this created on their behalf — would need authorisation to offer, attempt to redeem or carry on activities to maintain the value of their qualifying stablecoin, or arrange for someone else to do any of these.
There is no special treatment for decentralised finance activities. They are within scope if there is a clear controlling person (such as an intermediary) carrying on an activity and the FCA proposes to provide further guidance to help such firms understand their obligations. They are not covered by the regime if they are truly decentralised.
There are also amendments to other related pieces of legislation.
In particular, authorised cryptoasset firms will not need to register with the FCA under the money laundering regulations, although they will need to notify the FCA before acting as a cryptoasset exchange provider or custodian wallet provider.
The financial promotion restriction is also being amended to align the controlled investments to the new definitions and extended to include safeguarding, operating a CATP and making arrangements for staking as controlled activities.
We do not yet know when this will all come into effect but there are still many details that need to be determined.
As well as consulting on the topics in the discussion paper, the FCA has a number of other important discussion and consultation papers planned.
This includes numerous critical topics such as rules for using stablecoins and safeguarding, and conduct and firm standards including the consumer duty.
We will also need to see details of the FCA’s approach to regulation. The FCA crypto roadmap suggests the gateway will open some way into 2026.
Hannah Meakin is a partner at Norton Rose Fulbright
