UK crypto regulation: Status update

2023 is proving to be a pivotal year for the regulation of cryptoassets in the UK.

The Financial Services and Markets Bill will be enacted in the coming weeks. The Bill lays the foundations for some stablecoins to be regulated. For example, the issuance and custody of fiat-backed stablecoins which are used for retail payments activities will be regulated in a similar way to other payment methods. This marks phase 1 of the government’s approach to crypto regulation.

Phase 2 envisages regulating a wider range of cryptoassets and cryptoasset activities. The Bill clarifies that the government can use its existing powers to create new regulated activities relating to cryptoassets. A consultation closes at the end of April for views on what this future regulatory regime might look like.

In parallel, draft legislation shows how the UK will extend its financial promotion regime to apply to cryptoassets. Once the changes take effect later this year, marketing of activities relating to qualifying cryptoassets which be much more strictly regulated. An exemption to the financial promotion restriction will allow cryptoasset businesses which are registered with the FCA to continue marketing their services but these firms will need to make sure their adverts meet the FCA's standards.

FCA-registered cryptoasset businesses also have less than five months to prepare for the introduction of the travel rule. This new anti-money laundering requirement obliges firms to share more information about the parties to cryptoasset transfers.

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