UK Treasury Moves to Bring Crypto Under FCA Regulation by 2027

The UK Treasury has finalized draft legislation aimed at placing cryptoassets under the oversight of the Financial Conduct Authority (FCA), with full implementation expected by October 2027. The proposed framework seeks to extend existing financial regulations to the crypto sector, rather than creating a separate regime.

Under the legislation, activities such as operating crypto exchanges, providing custody services, dealing in qualifying cryptoassets, and issuing stablecoins will require FCA authorization. Overseas firms serving UK retail consumers will also fall under this stricter regulatory scrutiny, moving beyond the previous requirement to simply register under anti-money laundering rules.

Chancellor Rachel Reeves described the move as “a crucial step in securing the UK’s position as a world-leading financial centre in the digital age,” noting it provides clarity for legitimate firms while targeting “dodgy actors.”

The FCA has highlighted several focus areas for the upcoming regulatory regime. Consumer protection will be extended to crypto firms, including transparency standards and potential limits on using credit to purchase cryptoassets. Market integrity measures will address potential market abuse and set standards for trading on UK-authorized platforms. Additionally, qualifying stablecoins used as payment will face stringent backing and redemption requirements, with systemic operators overseen by the Bank of England. Prudential standards, such as capital and liquidity requirements, will apply to stablecoin issuers and custodians to ensure financial resilience.

The phased approach gives industry participants time to comply with the new framework, reflecting the UK’s effort to balance innovation with robust oversight.