Crypto Regulations in the United Kingdom 2025

The post Crypto Regulations in the United Kingdom 2025 appeared first on Coinpedia Fintech News

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 TypeRate/AllowanceTaxable EventsReportingCapital Gains Tax (CGT)18% (basic), 24% (higher)Selling, trading, spending, or gifting crypto (not to spouse)Gains over £3,000 must be reported to HMRCIncome Tax0–45% based on income bandsMining, staking, airdrops, crypto paymentsIncome over £12,570 must be reportedLossesOffset against gainsCan reduce CGT liabilityMust be reported to HMRCExemptionsN/AHolding, transferring between own wallets, or gifting to spouseNot reportable

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

Crypto Companies

Tax TypeRate/AllowanceTaxable EventsReportingCorporation Tax25% (2025 rate)Profits from crypto-related businessAnnual returns to HMRCVATGenerally exemptApplies only to some servicesVAT returns if applicableFCA RegistrationMandatoryAML/CTF compliance, licensing requiredOngoing compliance and record keepingPayroll TaxPAYE/NICCrypto used to pay employeesMust be reportedRecord KeepingMandatoryFull transaction logs, KYC/AML dataSubject to FCA and HMRC audit

Crypto Licensing Rules for UK Companies

AspectDetailsRegulatory PerimeterApplies to exchanges, custodians, brokers, staking providers, stablecoin issuersMandatory LicensingRequired for all firms serving UK retail customers, including foreign companiesRegulated ActivitiesIncludes trading, custody, staking, and arranging crypto transactionsOverseas FirmsMust be UK-authorized if targeting UK retail clientsRequired StandardsMust meet standards on transparency, governance, risk, capital, and conductAML/CTF ComplianceFCA registration required for anti-money laundering obligationsImplementation TimelineDraft order published April 29, 2025; applications open for one yearPenaltiesNon-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.