UK government unveils proposed cryptocurrency regulations

UK government unveils proposed cryptocurrency regulations

The UK government has recently released a series of documents that outline the country’s proposed cryptocurrency regulations. Although some way behind the rest of Europe in establishing a solid framework for safer crypto activities that protect users, the UK has positioned these proposals as a step toward becoming a “great place for digital asset companies to invest and innovate”, according to Finance Minister Rachel Reeves. The UK’s forthcoming crypto rules aim to align local regulations with international standards to improve consumer protection and confidence, and market integrity. 

This article takes a closer look at the UK Government’s proposed cryptocurrency regulations and what they mean for UK crypto users. 

The UK’s stance on cryptocurrency regulations 

Looking back over crypto history in the UK, the country has taken a seemingly measured, sometimes hesitant stance on cryptocurrency regulations. In the 2010s, the UK, like most governments around the world, was just starting to talk about cryptocurrency and how to regulate these new digital assets. The focus was mainly on consumer warnings given their lack of experience, and observing the evolving space, rather than coming down hard and fast with firm rules. 

But things started to shift in 2020, when the UK implemented anti-money laundering (AML) regulations for cryptoasset businesses. In October of that same year, the Financial Conduct Authority (FCA) announced a ban on the sale of crypto derivatives to retail traders, flagging concerns over high volatility and the risk of losses. In 2023, the focus shifted to stablecoins, as HM Treasury published proposals to create a regulatory regime for cryptoassets. 

By November 2024, the UK government confirmed its plans to proceed with introducing this regime, aiming to bring activities like operating a cryptoasset trading exchange and stablecoin issuance under regulation. The most recent developments came to light just this week, when the UK government unveiled draft legislation outlining new regulated activities for crypto assets​. As the intended outcomes state, these proposals aim to enhance consumer protection, support innovation, and align the UK with international standards.

What does this mean for UK-based crypto traders?

As stated in the draft proposal, the aim of the UK government’s proposed cryptocurrency regulations is to "enhance consumer protection, support innovation, and align with international standards”. The draft legislation will bring crypto exchanges, brokers, and custodians under the Financial Conduct Authority's (FCA) supervision, aligning them with standards applied to traditional financial institutions. For UK-based crypto traders, this should lead to a more secure and trustworthy trading environment that prioritizes users. Following the announcement, UK Finance Minister Rachel Reeves said, “Today’s announcement sends a clear signal: Britain is open for business, but closed to fraud, abuse, and instability”.

The proposal also includes the decision to exempt overseas stablecoin issuers from its cryptocurrency regulations in a bid to cooperate with the U.S. Unlike the EU’s stricter MiCA framework, which rules that issuers must be locally authorized and meet rigorous liquidity requirements, the UK plans to allow foreign stablecoin providers to offer services to UK users without needing a domestic presence. This will mean greater access to a wider range of stablecoin options, including USDT (Tether), and potentially more competitive offerings from global platforms. 

For more insights and reflections on crypto trends, trading, how to use Limitlex, or to open a trading account with us, visit www.limitlex.com.