UK Cracks Down on Crypto Wild West—Exchanges Face New Rules, Investors Get (Theoretical) Shields

London throws its hat in the ring with a draft regulatory framework targeting crypto exchanges—because nothing says ’mature asset class’ like bureaucrats drawing boxes around it.

The proposed rules aim to rein in platform free-for-alls while offering token protection for retail punters—though let’s be real, when has red tape ever stopped a determined degen?

Key provisions include mandatory disclosures (read: fine print nobody reads), custody requirements (goodbye, ’trust me bro’ storage), and the FSA playing hall monitor. Because if there’s one thing crypto needs, it’s more middlemen taking cuts.

Silver lining? Clear rules could lure institutional money—assuming they don’t strangle innovation first. Place your bets on whether this becomes global template or cautionary tale.

• UK draft law brings crypto exchanges and dealers under financial services regulation.
• According to FCA research, UK crypto ownership rose from 4% in 2021 to 12% in 2024.
• UK and US plan transatlantic collaboration on digital asset regulation and innovation.

The UK government has released draft legislation to regulate cryptoassets. The proposal intends to bring digital asset exchanges, dealers and agents within existing financial services law to improve investor confidence and consumer protection. Chancellor of the Exchequer Rachel Reeves announced the changes during UK Fintech Week in London.

According to the government, the draft amends the Financial Services and Markets Act 2000 to include crypto-related activities such as operating exchanges and offering custody services. The proposed framework establishes new transparency, operational resilience, and consumer protection standards that companies serving UK customers must implement.

These draft rules follow a notable rise in crypto adoption in the UK. According to data from the Financial Conduct Authority, 12% of UK adults owned or had owned crypto assets in 2024, compared to 4% in 2021. The initiative has been implemented to define SAFE regulatory boundaries for promoting responsible technological advancement.

International Cooperation and Transatlantic Alignment

In addition, Chancellor Reeves also revealed ongoing discussions with the United States to coordinate digital asset policy. These talks with U.S. Treasury Secretary Scott Bessent included proposals for a potential “transatlantic sandbox” for digital securities. The UK and US will continue this dialogue during the next June Financial Regulatory Working Group meeting.

The UK’s approach aligns more closely with the United States’ regulatory path, which treats crypto assets as securities, rather than the European Union’s specialized crypto framework under the Markets in Crypto Assets Regulation (MiCA). Experts suggest this alignment may offer greater clarity to firms operating across the Atlantic.

Detail on how the US and UK are collaborating on digital assets

“The Chancellor also revealed that the UK and US will use the upcoming UK – U.S. Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets.

This includes…

Nick Price, a financial services lawyer at Osborne Clarke, described the legislation as “a simple and straightforward piece” that introduces regulatory certainty. Simon Treacy from Linklaters noted that while the draft defines which assets and activities are in scope, more detailed implementation rules will follow.

Stablecoins and Crime Enforcement Measures

The legislative framework also contains provisions that intend to regulate stablecoin operations. The proposed framework specifies UK-based stablecoin issuers as the exclusive subjects for regulatory oversight. The inclusion reflects the growing recognition of stablecoins as digital payment instruments, potentially affecting monetary policy and consumer safety.

In addition, the UK government passed new legislation strengthening crypto-related enforcement efforts as part of its regulatory expansion. The crime bill passed earlier this year increases police authority to confiscate digital assets related to illegal activities.

These developments form part of the government’s broader Plan for Change which includes measures to grow the financial services industry. Reeves stated that the new rules “make Britain the best place to innovate and the safest place for consumers.” She emphasized that the UK remains open to responsible innovation but will act decisively against fraud and instability.

Notably, the Treasury is accepting feedback from stakeholders on the draft until May 25. After collecting industry feedback the final legislation will be introduced later in 2025.

Additionally, the Chancellor plans to launch the UK’s first Financial Services Growth and Competitiveness Strategy on July 15 at the annual Mansion House speech. The strategy prioritizes fintech development and targets UK leadership in digital finance.