In brief
- The UK Treasury plans to regulate crypto firms just like other financial products already under FCA oversight.
- The shift would expand rules beyond AML to disclosures, governance, and consumer protection.
- Crypto firms in the UK would need to balance innovation with compliance, but efforts for those would soon get materially more complex, Decrypt was told.
UK officials are drafting legislation that would bring crypto companies fully under the country’s financial regulatory framework, extending oversight beyond existing anti-money laundering rules and placing crypto services within the Financial Conduct Authority’s remit.
The Treasury proposals would regulate firms that provide crypto services in the same way as other financial products, subjecting them to transparency, consumer protection, and market conduct standards enforced by the FCA, according to a report from The Guardian.
“Bringing crypto into the regulatory perimeter is a crucial step in securing the UK’s position as a world-leading financial centre in the digital age,” Rachel Reeves, the UK chancellor of the exchequer, said in a statement.
The measures are part of a broader package of reforms that ministers say are intended to address fraud risks and close regulatory gaps as crypto activity becomes more integrated with mainstream finance.
Crypto regulation in the UK
At present, most crypto firms operating in the UK are regulated primarily through AML registration with the FCA. That regime focuses on financial crime controls, such as customer due diligence and transaction monitoring, instead of through product disclosures, governance requirements, or investor protections.
The government now reportedly plans to move crypto regulation beyond that limited perimeter, with legislation expected to be introduced by October 2027.
“The rules we are putting in place are going to be proportionate and fair. They are going to be good for growth, encourage firms to invest here and protect consumers as well,” City Minister Lucy Rigby told the Financial Times on Sunday. “I don’t see any conflict between those things.”
Decrypt has reached out to the Financial Conduct Authority and HM Treasury for comment and would update this article should they respond.
In September, UK authorities consulted on tighter AML standards for crypto firms, including clearer expectations for senior management, ownership changes, and compliance systems.
Those proposals were framed as updates to the existing AML framework rather than a wholesale restructuring of market oversight.
The push also comes as concerns over political financing have led UK political parties to call for reforms on crypto donations earlier this month, citing transparency and traceability issues.
‘Into the same bucket’
Once implemented, the new rules could represent “a structural shift in how crypto startups are treated in the UK,” Cessiah Lopez, head of policy and research at Solana’s Superteam UK, told Decrypt.
“Full FCA regulation effectively moves crypto into the same bucket as traditional financial services from day one,” Lopez noted.
For startups, it could change “the cost, operational management and the skillsets needed to even get to market,” she said. While consumers need to be protected, she said, “regulations also need to be balanced to make room for entrepreneurs to innovate.”
Without that balance, the UK could “lose great products and the consumers the regulators want to protect won’t even have products to use because they’ll all be operating and scaling overseas,” she added.
“This is a material shift, and one that many in the UK have been waiting for,” Conrad Young, co-founder of London-based digital asset advisory firm Paragon, told Decrypt.
Bringing crypto firms under full FCA oversight “puts them inside the same perimeter as mainstream financial services,” Young said, adding that it “marks a move from policing the edges of crypto to regulating how these businesses actually operate.”
The new measures could also force crypto companies to change how they go about with product design, disclosures, and compliance, which would “get materially more complex and expensive,” Lopez said.
“Early-stage startups will need to think about consumer outcomes, risk warnings, governance, operational resilience from day one, and possibly before they even find product-market fit,” she explained.
Still, the changes could provide “credibility and clearer rules of the road” as an upside, Lopez added.
Quick iteration and innovation could become harder for crypto projects based in the country, she said, noting that some teams may decide the UK is “no longer the easiest place to launch unless they’re well-funded and regulation-ready from the start.”
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Source: https://decrypt.co/352317/uk-treasury-plans-to-bring-crypto-firms-under-full-fca-oversight
