New crypto regulation brings clarity and stability

As the UK government publishes draft legislation on the regulation of crypto assets, leading audit, tax and consulting firm RSM UK says this should bring greater clarity and stability to the financial services market. 

Erin Sims, financial services senior analyst at RSM UK said: “The UK government’s latest move to bring crypto assets within the regulatory perimeter should bring much needed clarity, UK consumer protection and market integrity.

“The proposed rules, which would bring crypto exchanges, dealers and agents into the scope regulation, are a critical step in the UK’s evolving crypto strategy, aligning with the US approach of treating most crypto assets as securities. That alignment may offer benefits in terms of international cooperation.

“Until now, the UK’s regulatory approach to crypto has been largely reactive, focused on anti-money laundering (AML) registration and limited oversight by the Financial Conduct Authority (FCA). The fragmented system has struggled to keep pace with the explosion in digital asset use and the equally rapid rise in fraud. Crypto fraud accounted for 66% of all investment fraud reported in the UK last year, a 16% increase from the previous year. By requiring crypto firms to be licensed and registered with the FCA, and holding companies accountable through enhanced enforcement powers, the government is laying the groundwork for a safer, more trustworthy digital asset ecosystem. Critically, the legislation also introduces improved investor protection mechanisms, allowing victims of misconduct clearer avenues for redress.

“While the government maintains that its regulatory push is aligned with its broader pro-growth agenda, whether these rules will foster meaningful competition in the UK’s crypto sector remains to be seen. For now, the focus is on getting the foundations right. But with global jurisdictions racing to attract digital asset innovators, the next phase of the UK’s rulemaking will need to strike a delicate balance between control and creativity.”