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HM Treasury has published a draft statutory instrument which, when brought into force, will introduce a new regulatory regime for cryptoassets in the UK.
The Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 will take forward proposals to bring certain activities involving cryptoassets within the UK’s regulatory perimeter. For the first time, firms engaging in these activities will be authorised and supervised by the Financial Conduct Authority (FCA) in the same way as traditional financial services firms.
What are the new specified activities?
The draft Order creates a comprehensive raft of new specified activities:
- Issuing qualifying stablecoin in the UK (Article 9M)
- Safeguarding or custody of qualifying cryptoassets and relevant specified investment cryptoassets (Article 9O)
- Operating a qualifying cryptoasset trading platform (Article 9T)
- Dealing in qualifying cryptoassets as principal (Article 9U)
- Dealing in qualifying cryptoassets as an agent (Article 9X)
- Arranging deals in qualifying cryptoassets (Article 9Z).
- Qualifying cryptoasset staking (Article 9Z7)
What degree of connection with the UK will be required to fall within the perimeter?
Section 418 of the Financial Services and Markets Act 2000 (“FSMA”) will be amended in line with the general principle that cryptoasset firms serving UK retail customers should be authorised in the UK.
How the perimeter applies will however depend upon the activity.
Firms issuing qualifying stablecoin will be required to be authorised if they are carrying on this activity from an establishment in the United Kingdom.
Firms offering safeguarding / custody services and staking will generally need to be authorised in the UK if they are carrying on these activities in the UK but also if they are doing so overseas but on behalf of a consumer in the UK.
Firms engaging in the other activities (including operating a trading platform, dealing in cryptoassets as principal or agent and arranging deals) that are dealing directly or indirectly with UK retail consumers will generally need to be authorised in the UK regardless of whether the firm is based in the UK or overseas.
What is not included within the draft Order?
Plans within the original proposals to bring payments using fiat-backed stablecoins within the scope of the Payment Services Regulations 2017 have been deferred.
The draft Order makes no provision for decentralised finance (DeFi), on the basis that if the activity in question is being undertaken on a truly decentralised basis, by definition there is no person or entity amenable to authorisation and supervision.
Finally, proposals for a new market abuse regime for cryptoassets (MARC) and a new framework for market admissions and disclosures (A&D) provisions are not part of the current draft legislation but have been published separately and will be brought forward in due course.
How will the new regime interact with the current MLR regime?
The new authorisation regime goes much further than the current AML registration regime. Firms currently registered under the Money Laundering Regulations (MLRs) will have to apply for authorisation in order to undertake in-scope activities.
Once authorised, firms will not be required to additionally register under the MLRs; they will of course have to comply with AML requirements.
When will the new regime come into force?
The expectation is that this legislation will be passed by the end of 2025.
Firms entering the market will be required to obtain authorisation before conducting in-scope activities.
Firms already engaging in these activities (i.e., those registered under the MLRs) will have a short period of time to submit applications for authorisation; where authorisation is not granted, the firm will be required to wind down that part of the business within a prescribed time period.
Further information
If you have any questions regarding this blog, please contact Jill Lorimer in our Financial Services Group.
About the author
Jill is a partner in Kingsley Napley’s Financial Services Group and has an extensive track record in advising firms and individuals facing regulatory and criminal investigations by the Financial Conduct Authority (FCA). She has a keen interest in all criminal and regulatory aspects of cryptoassets.
We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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