Key takeaways

• This is the legal text that defines which cryptoasset business activities will be regulated in the UK in the future. It also gives UK regulators the powers to develop the specific rules.
• Cryptoasset custody; trading; staking and stablecoin issuance will all count as future regulated activities.
• Businesses will need to map their exposure and submit authorisation applications for any in-scope regulated activities in order to continue their business.
• Rules cover any cryptoasset business wanting to serve UK consumers, regardless of location. Applications are not expected to open before Q2 2026 when the detailed rules consultation process concludes.

From here to there: practical impacts for conducting crypto business in the UK

The UK is moving from an AML-based registration regime to full-fat activity-based regulation

Currently, UK cryptoasset businesses are registered with regulators (specifically the Financial Conduct Authority FCA) under the anti-money laundering regime.

HM Treasury’s Statutory Instrument updates and expands this to require cryptoasset businesses to get specific authorisations (regulatory permissions) that apply to cryptoasset activities themselves.

In short, crypto businesses will, for the first time, need full regulator authorisation for specified activities, much like traditional finance firms.

The territorial scope of UK rule-making is undergoing a drastic overhaul

Previously, regulator registration requirements applied solely to UK-domiciled firms. Under the new proposals, rules will apply to any firm globally that wishes to reach a UK consumer.

That means some form of regulated UK presence for any overseas crypto platform serving UK consumers.

Quick view: what’s in scope of the future UK crypto regime?

The Statutory Instrument spells out what the new ‘regulated activities’ for crypto will be.

In a nutshell, cryptoassets that meet the newly specified legal definitions – very broadly: ‘unbacked’ cryptoassets + currency-referenced tokens, i.e. the lion’s share of today’s traded cryptoassets – will be brought into the same regime that governs securities and other traditional investments.

Firms doing any of the following in relation to those assets will need FCA authorisation:

• Operating a crypto trading platform that reaches UK consumers
• Custodying cryptoassets of any type
• Trading on behalf of clients or on one’s own book
• Brokering crypto transactions
• Performing stablecoin activities from a UK entity
• Taking in user funds to participate in blockchain validation.

Conducting these activities in or to the UK without proper authorisation will become illegal.

Quick view: what’s not in scope of the future UK crypto regime?

The Statutory Instrument also introduces some notable exemptions:

• Overseas firms that serve only UK institutional customers won’t need to be authorised.
• An overseas firm that serves UK consumers through an intermediary won’t need authorisation if there is a UK authorised intermediary standing between it and the end consumer.
• The definition of ‘qualifying cryptoassets’ has been narrowed down to exclude ‘specified investment cryptoassets’ (tokenised financial instruments essentially), except for the authorised activity of custody, which applies to both.
• E-money; central bank digital currency; and cryptoassets that are non-tradeable or usable only in exchange for goods & services also get carve-outs.
• An overseas custodian is exempt from authorisation where it carries out that activity on the instruction of a UK entity authorised for the custody activity.
• Stablecoin authorisations target only activity undertaken from within the UK, and not stablecoins issued from overseas. A qualifying stablecoin must also be fiat-referenced and so excludes commodity or algorithmic stablecoins.
• Where any activity can be demonstrated to be conducted on a ‘truly decentralised’ basis, there will be no authorisation obligation for that activity.

What’s the timeline?

An application window for UK crypto authorisations will be announced no later than 1 year before the new regime goes live. All firms wanting to continue their UK business will need to apply within that application window. Based on the current crypto roadmap, it doesn’t seem likely that the application window will open any sooner than Q2 2026. Observers will also be watching closely for the announcement of the regime ‘go-live’ date. This will be announced when the final Statutory Instrument is brought into law later in the year and will provide the ‘T-1yr’ reference point for the announcement of the application window.

For firms that have applied in the relevant application window, the regime will not apply for as long as the FCA takes to provide a determination on any application (up to a theoretical 2 years post-commencement). Firms who apply and are refused authorisation will also be placed into a transitional arrangement (2-year max) within which to orderly wind down their business.

Risks, opportunities and the Zumo take

Chancellor Rachel Reeves, unveiling the draft legislation at the Innovate Finance Global Summit (IFGS), said the intent is to make the UK “a great place for digital asset companies to invest and innovate.” The rationale is to provide a clear crypto rulebook, integrate digital assets into financial services at large, and set the stage for large-scale growth.

At this point, the jury is out. On one hand, clear regulation can be hugely positive – it signals that crypto is “open for business” in the UK with government blessing. On the other, compliance burdens will rise quickly and dramatically. Firms will need to invest in robust systems, controls and personnel to meet authorisation standards, and this will sink or swim the next generation of cryptoasset service providers.

Our view of what to watch

• Overseas crypto businesses dealing with UK consumers will need to consider how they deal with the required UK authorised touchpoint. As a result, we expect there to be more and more of a market for specialist UK intermediaries (like Zumo) that provide localised expertise and localised infrastructure for global crypto businesses to access the UK market.
• As intermediary structures develop and the UK authorisation regime embeds, expect this to work to the advantage of crypto embedding into ‘Main Street’ and the opportunity for non-crypto businesses to add on crypto services for consumers by partnering with UK authorised intermediaries.
• The future regime diverges from other approaches, notably the EU, in adapting existing financial services legislation wherever possible rather than introducing a bespoke rulebook. How neatly will the reference activities transpose to crypto businesses? And does it set the scene for traditional finance to enter the sector in force, with the advantage of existing compliance infrastructure, resources and familiarity with reference rules?
• Once crypto firms are regulated on a par with investment firms, how much of the investment firm style benefits will they receive in return in terms of customer deposit protections, equal access to banking relationships, and easing of consumer access to regulated crypto platforms as well as a wider spectrum of crypto products?
• How does stablecoin regulation evolve in the future? At the moment, stablecoins have been classified as investments rather than payments instruments, which means users will be confronted with intimidating financial promotions investment language. Moreover, the UK is departing from the EU and Hong Kong in limiting stablecoin activities to those carried on from the UK, rather than those referencing the currency of the jurisdiction. This seems to provide very little incentive to establish a GBP stablecoin in the UK.
• What does it mean to provide activities on a ‘truly decentralised’ basis and how will this be tested over time. DeFi projects offer differing degrees of in practice decentralisation and truly decentralised is for now a very wooly concept.

Bottom line

The UK is swinging for the fences with its crypto regulatory ambitions. A clear legal framework could propel the industry into the mainstream – or, if miscalibrated, drive innovation offshore. UK regulators will be continuing to consult on the detailed application of the topics outlined here throughout this year and into next – so now is the time to make voices heard and to be preparing your business for the future UK landscape.

To discuss any of the topics raised in this briefing, please reach out to a member of the Zumo team.