The United Kingdom is moving toward stronger cryptocurrency regulations. The government is working on new rules to avoid penalties and ensure safe use of digital assets. These rules aim to support new technology while protecting users and keeping markets stable.
Crypto is becoming more popular in the UK, and the UK crypto market is expected to reach $1.6 billion in revenue. This leads to an important question: What changes in UK crypto regulations are driving this growth?
The Financial Conduct Authority (FCA) published proposals to regulate:
These proposals aim to ensure stablecoins maintain their value and provide transparency around asset backing. The FCA is also considering incorporating stablecoin regulation into its innovation services and plans to coordinate closely with the Bank of England.
Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, emphasized the importance of stablecoins in modern payment systems. She confirmed the review of a viable model for integrating stablecoins into the UK’s payment rails. The related bill passed its third reading in Parliament on May 8 without changes.
The FCA released a discussion paper exploring regulation around:
The paper seeks industry feedback for future regulatory developments.
HM Treasury published a draft statutory instrument outlining:
The Treasury and Debt Management Office (DMO) confirmed that unbacked cryptocurrencies and stablecoins are excluded from the DSS program unless expressly approved by the Bank of England and FCA.
The House of Lords Committee Stage of the Property Bill clarified legal treatment of:
This update strengthens the legal framework surrounding digital assets.
The UK government updated the DSS regulations following the Financial Services and Markets Act 2023. Key changes:
Parliament officially amended the FSMA 2000, categorizing:
The Financial Conduct Authority (FCA) is the main regulatory body overseeing cryptoassets. It ensures compliance with AML and CTF standards.
Prominent platforms like Coinbase and Gemini are registered with the FCA as Virtual Asset Service Providers (VASPs), offering secure and transparent crypto services to UK users.
Additionally, HM Treasury and the Bank of England contribute significantly to shaping the nation’s digital asset regulations. The FCA also enforces strict advertising standards to ensure crypto promotions are clear, fair, and not misleading.
| Tax Type | Rate/Allowance | Taxable Events | Reporting |
| Capital Gains Tax (CGT) | 18% (basic), 24% (higher) | Selling, trading, spending, or gifting crypto (not to spouse) | Gains over £3,000 must be reported to HMRC |
| Income Tax | 0–45% based on income bands | Mining, staking, airdrops, crypto payments | Income over £12,570 must be reported |
| Losses | Offset against gains | Can reduce CGT liability | Must be reported to HMRC |
| Exemptions | N/A | Holding, transferring between own wallets, or gifting to spouse | Not reportable |
Note: Crypto exchanges must share user data with HMRC. Failure to report taxable events may result in penalties.
| Tax Type | Rate/Allowance | Taxable Events | Reporting |
| Corporation Tax | 25% (2025 rate) | Profits from crypto-related business | Annual returns to HMRC |
| VAT | Generally exempt | Applies only to some services | VAT returns if applicable |
| FCA Registration | Mandatory | AML/CTF compliance, licensing required | Ongoing compliance and record keeping |
| Payroll Tax | PAYE/NIC | Crypto used to pay employees | Must be reported |
| Record Keeping | Mandatory | Full transaction logs, KYC/AML data | Subject to FCA and HMRC audit |
| Aspect | Details |
| Regulatory Perimeter | Applies to exchanges, custodians, brokers, staking providers, stablecoin issuers |
| Mandatory Licensing | Required for all firms serving UK retail customers, including foreign companies |
| Regulated Activities | Includes trading, custody, staking, and arranging crypto transactions |
| Overseas Firms | Must be UK-authorized if targeting UK retail clients |
| Required Standards | Must meet standards on transparency, governance, risk, capital, and conduct |
| AML/CTF Compliance | FCA registration required for anti-money laundering obligations |
| Implementation Timeline | Draft order published April 29, 2025; applications open for one year |
| Penalties | Non-compliance may lead to enforcement, penalties, or criminal charges |
The UK has emerged as the fastest-growing country in terms of crypto adoption, according to Gemini’s “State of Crypto” report.
Notable trends:
The UK government has not disclosed any official crypto holdings, but it supports legal crypto trading. While cryptocurrency is not legal tender, it is legal to buy, sell, or hold crypto assets under current UK regulations.
The UK is laying the foundation to become a global hub for cryptocurrency and digital assets. With robust legal frameworks, institutional clarity, and active efforts to foster innovation while ensuring consumer safety, the country is paving the way for a thriving crypto ecosystem. As these regulations unfold, the UK is set to play a defining role in shaping the future of crypto globally.
The UK has over 23 million crypto users, with a 35.12% adoption rate, leading Europe in crypto engagement.
The FCA regulates cryptoassets, working with HM Treasury and the Bank of England on comprehensive frameworks.
Capital gains tax applies at 18%–24%, while income tax (0%–45%) applies to mining, staking, and crypto earnings over £12,570.
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