Key Points
- The U.K. government’s plans to regulate cryptoassets are advancing, with a view to finalizing proposed rules this year and implementing its regime by the end of 2027.
- U.K. regulators have been consulting the industry on a number of areas, including stablecoins, prudential requirements and market abuse.
- In particular, the FCA has published proposals for regulating a number of cryptoasset activities.
- The U.K.’s position follows progress in the U.S. to regulate digital assets and implementation of the EU’s framework under MiCA.
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Over the past year, governments and regulators globally, including in the U.S. and European Union, have taken measures to manage various aspects of cryptoasset activities. In the U.K., the government has continued its push to regulate cryptoassets, with a wave of consultations taking place at the end of 2025 and through Q1 2026.
These coordinated legislative and regulatory efforts are a material step forward as the U.K. aims to finalize a cryptoasset regime during the course of 2026, with a view to its framework taking effect in 2027.
Meanwhile, in the U.S., the Trump administration’s support for digital assets continues, with regulation for stablecoins under the GENIUS Act expected to come into effect by early 2027. And the EU’s Markets in Crypto-Assets Regulation (MiCA) continues to be rolled out at a national level by member states.
How Does the UK Intend to Regulate Cryptoasset Firms?
The Financial Conduct Authority (FCA) is proposing regulating the following areas of cryptoasset activity:
- Trading platforms.
- Intermediaries.
- Lending and borrowing.
- Staking.
- Decentralized finance.
In addition to these areas, there are further specific proposals from the U.K. regulators on the issuance and custody of stablecoins. (See our June 4, 2025, client alert “UK FCA Publishes Consultation Paper on Stablecoin Issuance and Cryptoasset Custody in the UK.”)
Cryptoasset Trading Platforms
Firms operating cryptoasset trading platforms (CATPs) in the U.K. or serving U.K. consumers would need to be FCA-authorized with a legal entity in the U.K. The operational rules for CATPs leverage off existing rules for multilateral trading platforms under the Markets in Financial Instruments Directive, albeit with slightly lighter requirements.
In certain circumstances, a CATP may operate through a combination of a U.K. legal entity and a U.K. branch of an overseas entity, enabling access to global liquidity pools. Overseas firms serving U.K. institutional clients would not be regulated.
Another proposal is a requirement that CATPs implement nondiscriminatory rules and procedures for access, operation and order execution, while ensuring systems and controls are adequate for the nature of the platform. A principles-based approach to mitigate against the risks of disorderly markets arising from trading algorithms would be required — and extend to the prevention, detection and disruption of market abuse, with large CATPs monitoring and reporting suspected market abuse across platforms.
The FCA also expects CATPs to be risk-neutral trading systems, with legal separation of activities that lead to credit exposure (beyond exposures arising from settlement activity or leverage offered by affiliates).
In a shift from its original position, the FCA is proposing to permit some principal dealing activities by U.K. CATPs on their own platform, including matched principal trading as well as allowing affiliates to trade on the CATP.
Cryptoasset Intermediaries
Cryptoasset intermediaries include persons who:
- Deal in qualifying cryptoassets as principals or agents.
- Arrange deals in qualifying cryptoassets.
In addition to consumer, conduct and prudential requirements (which are being consulted on separately), the FCA is proposing that cryptoasset intermediaries comply with a broader set of rules focused on best execution, transparency, disclosure, reporting and governance, including conflicts of interest.
The FCA is also requiring that:
- Any cryptoasset other than U.K.-issued qualifying stablecoins be admitted to trading on at least one U.K.-authorized CATP before any intermediary can deal in it for a U.K. retail client.
- Orders for U.K. retail or elective professional clients be executed only on U.K.-authorized execution venues.
Cryptoasset Lending and Borrowing
Cryptoasset lending involves the disposal of a qualifying cryptoasset subject to an obligation or right to reacquire the same or equivalent qualifying cryptoasset, typically with a form of yield. Lending and borrowing of cryptoasset services are expected to be covered by the dealing and arranging activities set out above.
The FCA is no longer proposing to restrict firms from offering retail clients access to cryptoasset lending and borrowing services. That said, given the risk profile of these services, the FCA is focused on mitigating risks for retail clients, including by establishing requirements for specific record-keeping, information and express prior consent.
Retail clients would also be required to over-collateralize any cryptoasset borrowings in order to address the credit risk to the cryptoasset firm. Such firm’s recourse would be limited to that collateral so that negative balances cannot arise with retail clients.
Staking
Staking is the process of using cryptoassets for proof-of-stake blockchain validation. The FCA’s primary concerns center around:
- A lack of consumer understanding.
- The reliance on third parties to run key components of the staking process.
The FCA seeks to address these risks through a combination of specific information and consent requirements for retail clients, together with an extension of the FCA’s operational resilience framework to all regulated cryptoasset firms (including staking firms).
Decentralized Finance
“DeFi” typically refers to financial systems that operate with a high degree of automation or decentralization.
The FCA has acknowledged the U.K. Treasury position that “where activities are being undertaken on a ‘truly decentralized basis, i.e., where there is no person that could be seen to be undertaking the activity by way of business’ then they would not fall in scope of the regulated activities.” The FCA does, however, plan to see if there is “an identifiable controlling entity” for any DeFi services, and if so seek to apply its rules to this entity.
To address concerns around operational resilience and financial crime, the FCA would take a “same risk, same regulatory outcome” approach in applying the requirements outlined above to in-scope DeFi firms. While a bespoke regime for DeFi firms is not envisaged, further guidance is expected regarding:
- The factors the FCA will consider to determine the degree of decentralization and elements of control.
- How to better mitigate operational resilience and financial crime risks posed by DeFi.
The UK’s Crypto Road Map
The FCA’s proposals form part of the U.K. government’s wider efforts to grow the cryptoasset market within the U.K. financial services sector. Those efforts include, in particular:
- The final draft of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025, which will implement key elements of the government’s approach to regulating cryptoassets. (See our December 18, 2025, client alert “UK Legal Framework for Crypto Takes Shape With Draft Legislation and Three New FCA Consultations.”)
- The Bank of England’s revised proposals regarding a regulatory regime for sterling-denominated systemic stablecoins. (See our November 13, 2025, client alert “Bank of England Revises Its Proposed Regime for Regulating ‘Systemic’ Stablecoins.”)
- The FCA’s consultations, which ran through mid-February 2026, covering the proposals outlined above as well as:
- The detailed design of the Admissions and Disclosure regime and Market Abuse Regime for Cryptoassets.
- A proposed prudential regime for cryptoasset companies. (See our March 6, 2026, client alert “The Forthcoming UK Cryptoasset Prudential Regime: Implications and Considerations for Firms.”)
Next Steps
The consultations in the U.K. have now closed. While some of the details of the proposals may change, the broader principles are unlikely to. As such, firms currently operating overseas or through a U.K. branch should consider paying close attention to the U.K. rules on localization and deciding whether additional U.K. entities will be required.
In addition, the requirements on transparency will likely require a substantial operational undertaking for cryptoasset companies as they work to meet regulatory expectations.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.