On 29 April 2025, HM Treasury (HMT) published a draft statutory instrument (SI), the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, which sets out provisions to create a new regulatory regime for cryptoassets. An accompanying draft policy note has also been published.

Background

HMT published detailed proposals in October 2023 for creating a UK financial services regulatory regime for regulating cryptoassets, including stablecoin. It then confirmed in November 2024 that it would proceed with introducing the regime, broadly in line with the previously published proposals.

The new regime will create new regulated activities such as operating a cryptoasset trading exchange and stablecoin issuance, as well as market abuse and admissions and disclosures regimes. As well as bringing cryptoasset exchanges, dealers and agents into the regulatory perimeter, the changes will also result in crypto firms with UK customers being required to meet clear standards on transparency, consumer protection, and operational resilience, in the same way as firms in traditional finance.

Draft SI

The draft SI includes amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to:

  • Define “qualifying cryptoassets” and “qualifying stablecoin” (the principal classes of cryptoassets to which the amendments apply).
  • Classify “qualifying cryptoassets” and “qualifying stablecoin” as specified investments under the Financial Services and Markets Act 2000 (FSMA).
  • Specify certain activities relating to these assets as regulated activities, meaning that persons carrying on those activities will need to be authorised for that activity by the FCA.

In addition, there are associated amendments to other instruments, including to:

  • FSMA, in particular to set the geographic perimeter for the new regulated activities.
  • The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, to apply FSMA’s regulatory framework to the new regulated activities..
  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, to reflect the new regulatory perimeter.

There are also further consequential amendments to ensure that “qualifying stablecoin” backing assets are not considered either an alternative investment fund or collective investment scheme, and that there is a clear distinction between qualifying stablecoin and tokenised deposits on the one hand and electronic money on the other (through an amendment to the Electronic Money Regulations 2011).

Next steps

Any technical comments on the draft SI should be provided to HMT by 23 May 2025. HMT then plans to publish its final SI “at the earliest opportunity”, following engagement on the draft provisions with industry. 

HMT confirms that statutory provisions for the market abuse and admissions and disclosures regimes will be published “in due course”.

Related announcements

In a related press release, the Government also announced that the UK and US will use the upcoming UK-US Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets. It also announced plans to publish the first-ever Financial Services Growth and Competitiveness Strategy on 15 July 2025, alongside the Chancellor of the Exchequer’s Mansion House speech.

Comment

Hannah Meakin commented:

Firms around the world have long been trying to anticipate what this new legislation would say in order to plan their UK strategies.

They should not expect this draft legislation to provide all the answers. It is the framework which now needs fleshing out with detail. However, it is the essential next step which will allow the FCA and firms alike to move to the next stages of planning. And it provides some welcome clarity on the shape of the regime to come.

The regime as described in the draft legislation is broadly as outlined in the October 2023 feedback, which was updated in November 2024. However, there are some important changes and clarifications, many of which reflect industry feedback.

The scope of cryptoassets is further mapped out with some distinctions between normal qualifying cryptoassets, qualifying – fiat-backed – stablecoin and specified investment cryptoassets, which are also specified investments. It remains to be seen whether this will achieve the previous stated intention to avoid regulation of cryptoassets that are not used like investments.

The relevant activities of issuing qualifying stablecoin, safeguarding, operating a trading platform, dealing as principal or agent, arranging and staking have been defined a little further in some cases with relevant exclusions, although we anticipate there will still be some debate over the precise scope of several of these.

The position on territorial scope has developed with some welcome news for non-UK firms dealing with only institutional clients.

It is now clearer that authorised firms will not also have to be registered under the Money Laundering Regulations but they will have to notify the FCA and, of course, they will still have to comply with AML requirements.

There is still much work to be done before this becomes a fully fleshed-out regime. The FCA will specify when firms can make their applications, both for new applications and variations of permission. First they will have to set out an application period and process, and the requirements that will apply to these firms. We should start to see further details in the various discussion and consultation papers set out in the FCA’s crypto roadmap.