Draft:Cryptocurrency Regulation in the United Kingdom

Cryptocurrency Regulation in the United Kingdom

Cryptocurrency regulation in the United Kingdom deals with the nurturing legal and regulatory structure around using, marketing, taxing, and compliance of digital assets such as Bitcoin and Ethereum. It is supervised by the Financial Conduct Authority (FCA), HM Treasury, and the Bank of England. The UK seeks to protect the innovation alongside the consumer and financial protection. The UK has in place some essential laws regarding Financial Promotions, Anti-money Laundering, and Taxation, alongside more comprehensive reforms in 2026.

History of Cryptocurrency Regulation in the United Kingdom

There was virtually no regulation cryptocurrency in the UK from 2009 to 2017. While some financial and criminal laws would apply, there were no laws geared specifically toward digital assets. In 2018, the UK formed the Cryptoassets Taskforce comprised of the FCA, HM Treasury, and the Bank of England for unified policy formulation.

In 2019, the FCA published guidance categorizing cryptoassets into three tiers: exchange tokens, utility tokens, and security tokens.

The FCA was also given the responsibility to supervise the anti-money laundering (AML) and counter-terrorism financing (CTF) regulations for cryptoasset firms in January 2020. Another notable development occurred three years later with the implementation of the Financial Services and Markets Act (FMSA). This widened the scope of regulation to include stablecoins and created the Cryptoasset Financial Promotions Regime, which imposes promotional standards on all cryptoasset marketing targeted at UK users.

In November 2024, the FCA and the Bank of England published joint reports outlining their intentions to bring cryptoassets within the regulatory perimeter in their entirety by 2026, demonstrating a consolidated approach. The Travel Rule also came into effect in the UK in 2024, complying with the Financial Action Task Force (FATF) recommendations.

Regulatory Authorities

In the United Kingdom, no single organization oversees the entire cryptocurrency ecosystem. The regulatory and other government bodies concerned with the regulation of cryptocurrency include:

• Financial Conduct Authority (FCA): The FCA supervises cryptoasset firms doing business in or servicing UK consumers. Since January 2020, the FCA has acted as the designated supervisor of these firms. The FCA enforces UK advertising standards, consumer protection legislation, Brexit Advertising Standards as well as maintaining the public registry of cryptoasset companies operating in the UK crypto ecosystem

• HM Treasury: The HM Treasury defines the financial policies and was a co-founder of the Cryptoassets Taskforce.

• Bank of England: It tracks the systemic risks that cryptoassets, and especially stablecoins, pose to the economy.

• The Gambling Commission (UKGC): It licenses gambling businesses, some of which accept cryptoassets.

• Advertising Standards Authority (ASA): It works with FCA to regulate promotions of cryptoassets.

Current Regulatory Framework

As of 2025, the UK does not have a single, comprehensive law that captures every part of cryptocurrency. There is, however, an implemented system of laws that covers different aspects of the cryptocurrency world:

AML/CTF Regulations

All UK-based cryptoasset businesses have to register with the FCA in addition to complying with the AML/CTF responsibilities in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Under these regulations, the business is obligated to perform customer due diligence and transaction monitoring.

Financial Promotions

Per the FCA Guidelines in Financial Services and Markets Act 2023, UK-based businesses that wish to advertise cryptoassets to UK consumers have to ensure that their advertisements are not misleading. Advertisements also must contain adequate risk warnings and in a majority of situations, must be vetted by an FCA approved entity.

Travel Rule

The Travel Rule Mandate requires that cryptoasset service providers must obtain, maintain, and provide cryptoasset transfers details for the initiators and receivers of the transactions. The UK adopted the rule in 2024 to be in sync with the FATF legal framework.

Taxation

According to HM Revenue & Customs, cryptoassets are regarded as property for tax purposes. HMRC applies current tax laws to transactions involving cryptoassets. Depending on the nature of their transactions, individuals may incur Capital Gains Tax or Income Tax. In some scenarios, businesses could be subject to Corporation Tax as well as Value Added Tax (VAT).

Gambling Regulations

The UKGC has created a regulatory framework to address the unique risks posed by cryptoassets in gambling operations as a result of the increasing use of cryptocurrency in gambling. These operators are bound by the same licensing and compliance requirements as other gambling businesses.

Future Developments

In 2025, the Property (Digital Assets) Bill granted cryptoassets legal status as property in England and Wales. This legislation addressed the matters of digital asset ownership and legal disputes concerning them. The government of the UK has also expressed intentions to broaden regulation to cover the issuance of cryptoassets, their custody, lending, and other related services. The FCA and HM Treasury have indicated that these regulations will be gradually implemented by 2026.