Key Insights
- By 2027, crypto companies in the UK will be subject to full FCA regulations as an alternative to limited AML supervision.
- New legislation regards cryptocurrency as a legal property in itself, in which one can inherit ownership, transfer ownership, and recover in court.
- The increasing adoption of cryptocurrency and the rise of fraudsters are driving stricter regulations and enhanced consumer protection.
The UK Treasury is preparing a new regulatory framework that would place crypto asset firms under the same rules as traditional financial institutions by 2027.
The plan would bring digital asset businesses fully within the Financial Conduct Authority’s regulatory scope, ending the lighter oversight currently applied to most crypto activity.
Crypto Firms Face Full Regulatory Standards
Under the proposal, crypto assets would be treated like other financial products already governed by UK financial services law. According to the Treasury, the change is a response to the broader adoption of digital assets by the general public, the increasing threats related to fraud and market abuse, and the lack of consumer protection.
Additionally, Cryptocurrency exchanges, wallet providers, brokers, and token issuers would have to comply with the same standards as banks and investment companies. These are the transparency, operational resilience, customer protection, and fair market conduct rules.
At present, most crypto companies in the UK only register with the FCA for anti-money laundering purposes. That system focuses on crime prevention rather than consumer protection. The planned framework would replace this limited approach with full regulatory supervision.
Moreover, crypto exchange providers would need to disclose their services to a high standard and clearly clarify the risks to their customers. The FCA would also gain additional powers to monitor activities and enforce compliance, a framework officials assert would support compliant companies and eliminate those that fail to meet regulatory standards.
UK Chancellor of the Exchequer Rachel Reeves has stated that bringing crypto into the regulatory system is critical to maintaining the country’s position as a global financial center as finance becomes increasingly digital.
Rising Adoption Drives Regulatory Push
According to the data provided by the financial regulator, the number of people in the UK who own crypto assets has been increasing over the past few years; approximately 12% of adults currently own digital assets.
Moreover, Banking industry statistics indicate a 55% increase in scam losses from year to year. Many cases involved fake tokens and misleading platforms. Regulators see these trends as a key driver for reform.
