The UK Crypto Regulation in the field of fintech, but now it is in danger of being left behind in the international digital finance transformation. Cautious and slow pace in regulation of crypto by Britain is now considered a threat to their competitive position according to industry professionals who include previous Chancellor George Osborne. Is it too late that the UK is about to miss its second crypto-innovation wave?
Current State of UK Crypto Regulation
- On April 29, 2025, HM Treasury released draft legislation under the Financial Services and Markets Act to regulate cryptoassets and stablecoin issuance as regulated activities.
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The FCA launched two consultation papers in late May:
- CP25/14 on stablecoin issuance and cryptoasset custody.
- CP25/15 on prudential requirements for crypto firms (e.g. capital, liquidity, risk exposure).
- While the infrastructure is forming, final rules aren’t expected until 2026, leaving the regulatory environment in limbo for firms now.
The Warning from Industry Experts
- George Osborne, advisor to Coinbase, recently issued a stern warning: UK regulators’ overcautious stance risks letting Britain fall behind the U.S. and EU, especially on stablecoin and ETF frameworks.
- Analysts at OMFIF echoed Osborne’s view, citing “policy procrastination” and missed blockchain opportunities post-Brexit.
- Experts from bodies like CryptoUK and the British Blockchain Association express fear of a mass exodus of crypto startups and talent to jurisdictions with clearer, forward-thinking policies.
Global Competitors Are Surging Ahead
- The MiCA framework of the EU is completely in effect by December 2024, providing open, et connex rules between member states.
- The U.S. has already adopted the GENIUS Act that brings some clarity to stablecoins and allows institutions to access Bitcoin ETFs.
- The countries that have a fully operational model of licensing of crypto-business based firms include Singapore and the UAE (via VARA).
- The UK is still in the drafting and consultation stage compared to these dynamic models and they are lagging in practical usefulness and implementation.
What’s at Stake for the UK?
- Regulatory uncertainty in the UK gives a disadvantage to innovation (DeFi, tokenization, and stablecoins) in firms.
- Financial institutions, venture capitalists, and fintech startups are continuously pursuing crytpo friendly hubs like Singapore, the EU, or the UAE.
- The UK will run the risk of brain drain, lost positioning in fintech, and confidence in fintech linked to sterling. And it would all happen within a matter of time.
What Needs to Change?
Industry leaders call for:
- A clear stablecoin creation scheme, independent of crypto-speculator.
- Prudential regulations that were in consonance with international norms of crypto businesses.
- A framework to test DeFi.
- Simplification of cryptocurrency taxation and better direction to storage and staking custodians.
- Improved communication between the policymakers, the Bank of England and other regulators such as the FCA, to speed up processes.
Outlook: Can the UK Reclaim Its Digital Asset Leadership?
Signs of progress:
- The Department of Treasury proposes to complete the new regime by the year 2025.
- FCA has strengthened the top management as it has brought in a crypto-based senior adviser to fast track innovations and the development of confidence.
- However, as closing regulations are being planned to be implemented in 2026 and international rivals already are taking action, the UK might be running out of time to take the lead.
Conclusion
Otherwise, history could weather the UK as a nation that did nothing to mitigate the risk of becoming an openly-vulnerable digital payment infrastructure when the world is commencing to become stablecoin-based, tokenized, and institutionalized in their digital finances. The message to investors and entrepreneurs as well as regulators is perhaps predictable- to remain relevant, it is mandatory that the UK act swiftly after consultation.
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