Cryptoasset regulation in the UK: 2024–2026 timeline
The UK's approach to cryptoasset regulation has shifted decisively from a limited anti-money laundering registration regime toward comprehensive financial services regulation. The Financial Services and Markets Act 2023 granted HM Treasury the power to designate cryptoasset activities as regulated activities under the Financial Services and Markets Act 2000, enabling the FCA to extend its full regulatory toolkit — authorisation, conduct rules, and enforcement — to the sector. The pace of implementation has been faster than many in the industry anticipated, and firms that have operated under the relatively light-touch MLR registration regime should treat the incoming regulatory framework as a materially different compliance challenge.
The current AML registration regime under the Money Laundering Regulations requires all cryptoasset businesses conducting exchange or custodian wallet activities from the UK to be registered with the FCA. As of mid-2024, approximately 40 firms are registered, while many applicants have been rejected or withdrawn following the FCA's stringent assessment of their financial crime controls. The FCA has been explicit that registration does not indicate broader regulatory approval, and that registered firms will face additional scrutiny as the broader regulatory framework is implemented.
HM Treasury consulted in 2023 on a phased approach to bringing cryptoassets within the regulated activities order. Phase 1 covers fiat-backed stablecoins used for payments — these are expected to fall under FCA and Bank of England oversight as electronic money, with implementing legislation anticipated during 2025. Phase 2 extends to a broader range of cryptoasset activities including custody, exchange, and investment advice relating to qualifying cryptoassets. The FCA has published Discussion Paper DP23/4 setting out its proposed regulatory framework for these activities, covering authorisation thresholds, conduct standards, financial crime controls, and market integrity requirements. Firms should treat DP23/4 as the clearest available signal of the incoming regime and begin gap-assessing their operations against the proposed standards.
Financial promotions rules for cryptoassets were extended by HM Treasury on 8 October 2023, requiring all firms communicating or approving financial promotions relating to qualifying cryptoassets to be either FCA-authorised or to use an FCA-authorised approver. The FCA has taken a hard line on non-compliant promotions, issuing emergency intervention notices against unregistered entities and publishing a consumer alert list. Authorised firms approving cryptoasset promotions must conduct appropriate due diligence and must comply with the Financial Promotion Order requirements including the specific risk warning requirements introduced for this asset class.
Preparing for full authorisation
Firms anticipating the transition from AML registration to FCA authorisation should begin now: reviewing governance structures, capital adequacy, compliance resource, and financial crime controls against FSMA-standard expectations. The FCA's track record in assessing cryptoasset AML registrations suggests a demanding standard, and firms that have not already invested in robust compliance infrastructure face significant remediation work before they can credibly apply for authorisation.