Crypto Regulations in the United Kingdom 2025

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The United Kingdom is moving toward stronger cryptocurrency regulations. The government is working on new rules to avoid penalties and ensure safe use of digital assets. These rules aim to support new technology while protecting users and keeping markets stable.

Crypto is becoming more popular in the UK, and the UK crypto market is expected to reach $1.6 billion in revenue. This leads to an important question: What changes in UK crypto regulations are driving this growth?

Key Regulatory Developments in 2025

May 28, 2025 – FCA Proposals on Stablecoins and Custody

The Financial Conduct Authority (FCA) published proposals to regulate:

• Stablecoin issuance
  
• Crypto custody services
  
• Financial resilience of crypto firms
  

These proposals aim to ensure stablecoins maintain their value and provide transparency around asset backing. The FCA is also considering incorporating stablecoin regulation into its innovation services and plans to coordinate closely with the Bank of England.

• Feedback deadline: July 31, 2025
• Final rules expected: 2026

May 7, 2025 – Bank of England on Stablecoins

Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, emphasized the importance of stablecoins in modern payment systems. She confirmed the review of a viable model for integrating stablecoins into the UK’s payment rails. The related bill passed its third reading in Parliament on May 8 without changes.

May 2, 2025 – FCA Discussion Paper (DP25/1)

The FCA released a discussion paper exploring regulation around:

• Cryptoasset activities
  
• Trading platforms
  
• Staking services
  

The paper seeks industry feedback for future regulatory developments.

April 29, 2025 – HM Treasury Draft Statutory Instrument

HM Treasury published a draft statutory instrument outlining:

• Rules for issuing stablecoins
  
• Custody of digital assets
  
• Guidelines for crypto trading platforms and transactions
  

March 18, 2025 – Digital Security Sandbox (DSS) Restrictions

The Treasury and Debt Management Office (DMO) confirmed that unbacked cryptocurrencies and stablecoins are excluded from the DSS program unless expressly approved by the Bank of England and FCA.

February 4, 2025 – House of Lords Property Bill

The House of Lords Committee Stage of the Property Bill clarified legal treatment of:

• Crypto tokens
  
• Collateral arrangements
  

This update strengthens the legal framework surrounding digital assets.

January 30, 2025 – DSS Amendment

The UK government updated the DSS regulations following the Financial Services and Markets Act 2023. Key changes:

• Imposed anti-money laundering (AML) and counter-terrorist financing (CTF) rules on crypto firms
  
• Reinforced a risk-based approach to fraud prevention
  

January 9, 2025 – Financial Services and Markets Act 2000 Amendment

Parliament officially amended the FSMA 2000, categorizing:

• “Qualifying crypto assets”
  
• “Qualifying stablecoins”
  as regulated investments within the UK’s financial perimeter.
  

Who Regulates Cryptocurrency in the UK?

The Financial Conduct Authority (FCA) is the main regulatory body overseeing cryptoassets. It ensures compliance with AML and CTF standards.

Prominent platforms like Coinbase and Gemini are registered with the FCA as Virtual Asset Service Providers (VASPs), offering secure and transparent crypto services to UK users.

Additionally, HM Treasury and the Bank of England contribute significantly to shaping the nation’s digital asset regulations. The FCA also enforces strict advertising standards to ensure crypto promotions are clear, fair, and not misleading.

Crypto Taxation in the UK (2025)

Investors & Traders

Tax Type	Rate/Allowance	Taxable Events	Reporting
Capital Gains Tax (CGT)	18% (basic), 24% (higher)	Selling, trading, spending, or gifting crypto (not to spouse)	Gains over £3,000 must be reported to HMRC
Income Tax	0–45% based on income bands	Mining, staking, airdrops, crypto payments	Income over £12,570 must be reported
Losses	Offset against gains	Can reduce CGT liability	Must be reported to HMRC
Exemptions	N/A	Holding, transferring between own wallets, or gifting to spouse	Not reportable

Note: Crypto exchanges must share user data with HMRC. Failure to report taxable events may result in penalties.

Crypto Companies

Tax Type	Rate/Allowance	Taxable Events	Reporting
Corporation Tax	25% (2025 rate)	Profits from crypto-related business	Annual returns to HMRC
VAT	Generally exempt	Applies only to some services	VAT returns if applicable
FCA Registration	Mandatory	AML/CTF compliance, licensing required	Ongoing compliance and record keeping
Payroll Tax	PAYE/NIC	Crypto used to pay employees	Must be reported
Record Keeping	Mandatory	Full transaction logs, KYC/AML data	Subject to FCA and HMRC audit

Crypto Licensing Rules for UK Companies

Aspect	Details
Regulatory Perimeter	Applies to exchanges, custodians, brokers, staking providers, stablecoin issuers
Mandatory Licensing	Required for all firms serving UK retail customers, including foreign companies
Regulated Activities	Includes trading, custody, staking, and arranging crypto transactions
Overseas Firms	Must be UK-authorized if targeting UK retail clients
Required Standards	Must meet standards on transparency, governance, risk, capital, and conduct
AML/CTF Compliance	FCA registration required for anti-money laundering obligations
Implementation Timeline	Draft order published April 29, 2025; applications open for one year
Penalties	Non-compliance may lead to enforcement, penalties, or criminal charges

Crypto Adoption Rate in the UK (2025)

The UK has emerged as the fastest-growing country in terms of crypto adoption, according to Gemini’s “State of Crypto” report.

• Crypto user base: Over 23 million users
  
• Adoption rate: 35.12%
  
• Revenue forecast: Over $1.6 billion
  
• Comparison: Outpacing the US and France (both at 21%); second only to Singapore (28%)
  

Notable trends:

• 28% of UK investors started with memecoins
  
• 41% of investors now hold spot crypto ETFs, placing the UK among the top ETF-adopting countries
  
• 12% of the population currently owns crypto, though the risk of scams and fraud remains a concern
  

UK Government’s Stance on Cryptocurrency

The UK government has not disclosed any official crypto holdings, but it supports legal crypto trading. While cryptocurrency is not legal tender, it is legal to buy, sell, or hold crypto assets under current UK regulations.

Final Thoughts

The UK is laying the foundation to become a global hub for cryptocurrency and digital assets. With robust legal frameworks, institutional clarity, and active efforts to foster innovation while ensuring consumer safety, the country is paving the way for a thriving crypto ecosystem. As these regulations unfold, the UK is set to play a defining role in shaping the future of crypto globally.