In this article we will examine the draft regulatory regime and the FCAs crypto roadmap in order to ascertain what the rest of 2025 will hold for cryptoassets.
On 29 April 2025, HM Treasury published: (i) its draft statutory instrument on regulated activities and miscellaneous provisions relating to cryptoassets; and (ii) an accompanying policy note.
The draft rules were subject to comments until 23 May 2025, and the Government intends to legislate for the new regime by the end of this year, provided parliamentary time permits.
Broadly, the draft rules will expand the existing regulatory perimeter by extending the scope of the regulated activities regime and the rules relating to financial promotions. The proposed changes include:
Regulated activities
- Defining "qualifying cryptoasset", "qualifying stablecoin", "specified investment cryptoasset", "relevant specified investment cryptoasset", "authorised cryptoasset custodian", and "qualifying cryptoasset trading platform",
- Introducing specified activities in relation to cryptoassets, each with their own exclusions. These include:
- Issuing a qualifying stablecoin
- Safeguarding of qualifying cryptoassets and relevant specified investment cryptoassets
- Operating a qualifying cryptoasset trading platform
- Dealing in qualifying cryptoassets as principal
- Dealing in qualifying cryptoassets as agent
- Arranging deals in qualifying cryptoassets
- Qualifying cryptoasset staking
- The draft rules also clarify that stablecoin issuers are not within the scope of regulation for accepting deposits. Instead, this would fall under the new regulated activity of issuing qualifying stablecoins in the United Kingdom.
Financial promotions
- Updating the existing definition of "qualifying cryptoasset" to align with the new definition of "qualifying stablecoin" (as above).
- Removing the existing exclusion which relates to the promotion of qualifying cryptoassets by or on behalf of certain persons registered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
- Adding new controlled activities including:
- Safeguarding of qualifying cryptoassets and relevant specified investment.
- Operating a qualifying cryptoasset trading platform.
- Qualifying cryptoasset staking
Other key changes
- Amendments to the Financial Services and Markets Act 2000 are being made in respect of the geographic scope of the regulatory perimeter to ensure that cryptoasset firms, wherever based, providing services to UK retail customers should be authorised in the UK.
- Amending the MLRs so that firms authorised for the new regulated activities will not be required to register under the MLRs, but instead only notify the FCA if they are in scope of the MLRs as a cryptoasset exchange provider or custodian wallet provider. The existing requirements under the MLRs will still apply to those firms.
- Amending the: (i) Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001; (ii) Alternative Investment Fund Managers Regulations 2013; and (iii) Electronic Money Regulations 2011 (EMRs), in relation to qualifying stablecoins and their backing assets to exempt/remove them from the scope of these instruments.
- In relation to the EMRs, clarifying that cryptoassets representing deposits are not considered e-money.
Transitioning to the new regime
The draft rules introduce provisions that enable the FCA and PRA to issue directions, provide guidance, and make or approve rules prior to full commencement of these draft rules. This is intended to enable the FCA to prepare for the regime coming into effect. The rules as drafted also provide for a two-year transitional period for firms to become authorised under the new regime. Where a firm does not have its application for authorisation approved, it will need to enter orderly wind down of the business and will not be able to take on new business in relation to these regulated activities.
The FCA's crypto roadmap
The FCA published its crypto roadmap on 26 November 2024, indicating the FCA's next steps as it looks to develop the regulatory framework for cryptoassets in the UK. The crypto roadmap sets out a number of consultation papers and discussion papers that are due to be published throughout 2025 into early 2026, with all policy statements expected to be finalised in the course of 2026.
The FCA has already taken certain key steps to progress its plans, including publishing a discussion paper (DP24/4) on Regulating Cryptoassets – Admissions and Disclosures and Market Abuse Regime for Cryptoassets, on 16 December 2024 - this paper closed for comments on 14 March 2025.
In addition to this, the Government provided clarity on cryptoasset staking in the UK by means of the Financial Services and Markets Act 2000 (Collective Investment Schemes) (Amendment) Order 2015/17, which came into effect on 31 January 2025. This confirmed that "arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme". This has been welcomed as a positive step as the regulatory treatment of cryptoasset staking is of key interest to the industry. See our article here for further details.
Throughout 2025, we should expect the following papers to be published by the FCA:
Published Q2 2025
- Discussion paper on trading platforms, intermediation, lending, staking and prudential rules
- Consultation paper on stablecoins, custody and prudential rules
Due Q3 2025
- Consultation paper on conduct and firm standards for all regulated activities
- Consultation paper on admissions and disclosures and market abuse
Due Q4 2025/Q1 2026
- Consultation paper on trading platforms, intermediation, lending and staking, and the remaining material for the prudential sourcebook
Our comments
The Government's draft legislation is a positive step towards introducing a regulatory regime and improving consumer confidence in cryptoassets.
It will be interesting to see how the FCA approaches these subjects, especially in the context of the Government's call for the FCA to regulate for growth and general industry comments that the UK can capitalise on learnings from the EU's MiCA regime.
However, it is important that the timeframe stipulated in the crypto roadmap, and for legislating on the Government's draft regime, aren’t delayed if the UK is to capitalise on the opportunity to establish itself as a leading jurisdiction for cryptoassets, especially given the increasing pro-crypto narrative and developments in the US.
If the FCA meets the timeframe set out in the roadmap, we can expect the remainder of this year to be a big step towards understanding what the UK cryptoasset regulatory regime will look like.
If you are interested in understanding what these changes will mean for you in practice, please contact us.