UK Risks Becoming a Crypto Ghost Town as Startups Flee Regulatory Chill

London’s fintech crown slips as blockchain builders bypass Britain for sunnier regulatory climates—Dubai’s sandbox looks particularly inviting these days.

While the Treasury dithers on clear rules, founders vote with their feet: 3 in 4 UK crypto startups now incorporate overseas. The ’light touch’ that birthed Monzo and Revolut? Gone—replaced by compliance officers demanding paperwork thicker than a banker’s bonus.

One silver lining? At least the City won’t have to pretend to understand DeFi.

Unclear crypto regulations push firms to look elsewhere

While the United Kingdom hosts some of the leading fintech companies globally, the state of crypto businesses indicates the uncertainty that hampers growth. Cassie Craddock, Ripple’s UK and European managing director, added that Britain fails to progress while global counterparts adopt friendly crypto policies. 

The U.S., under the presidency of Donald Trump, has reduced the actions taken to enforce trade policies. The EU’s Markets in Crypto-Assets (MiCA) regulation is already effective, and others, such as Singapore, UAE, and Hong Kong, remain active. Craddock pointed out that these are the factors generating the global momentum the UK has yet to gain.

This intent to regulate stablecoins, staking, and crypto custody is clearly articulated by the UK Treasury in the draft legislation published on April 29, 2020. The proposal is part of the government’s “Plan for Change” and seeks to place digital asset companies under the FCA’s direct supervision.

Keith Grose, the head of Coinbase UK, highlighted that one more emerging problem is that traditional banks are pulling out of the crypto industry. He said debanking has escalated to the point that organizations cannot even do basic transactions. 

He noted, “You can’t build the future of the financial system here if we don’t have that level playing field. I think the U.K. will get it right — but there is a risk if you get it wrong that you drive innovation to other markets,”

An online survey of 83 firms in January of this year said half had been shut out or had accounts rejected by major banks. Grose stated that the UK needs to provide “intelligent” regulation to avoid detrimental effects.

New regime expands FCA oversight and tightens compliance rules

The draft Financial Services and Markets Act 2000 (Amendment) Order 2025 outlines new authorization requirements. All companies dealing with cryptoassets, providing custody services, issuing stablecoins, and staking services require a license.

Notably, new terminology, “qualifying cryptoassets,” has been created, and definitions of stablecoins differ from those of electronic money and tokenized deposits. The use of stablecoins for payments will not be regulated under the Payment Services Regulations in the UK. Still, the government suggests that new guidelines may be enacted as usage intensifies.

Crypto ads will also be subjected to more scrutiny. The legislation also specifies that only firms that the FCA has authorized should be allowed to approve their financial promotions. It eliminates waivers that used to permit registered firms to market services that have not been fully authorized.

However, such firms will be subject to the AML automatically, whereby they do not require registration but must adhere to the guidelines. The firms are required to notify the FCA when they begin or cease carrying out some or all of the activities within the new rules.

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