The UK’s new cryptoasset regime: A new regulatory architecture for the cryptoasset market

On 15 December 2025, the UK government published the draft legislation (“Draft Cryptoasset Legislation”) that will implement the new cryptoasset regulatory regime in the UK, which will enter into force on 25 October 2027.  The direction of travel is now clear, cryptoassets are being brought into line with the standards that apply to mainstream financial markets, with certain differences to reflect the nature of cryptoassets themselves.

The Draft Cryptoasset Legislation follows the consultation and call for evidence published and finalsied in 2023 (the “2023 Consultation”) (see our articles on this topic here and here) and the draft legislation published by the UK government in April 2025, reflecting the changes to the regulatory perimeter (“April 2025 Draft”) (see our article on this here).  

We summarise below some of the key changes introduced by the Draft Cryptoasset Legislation and how they may impact businesses operating within this space.

Cryptoassets now becoming regulated

As consulted on in the April 2025 Draft, there will be new regulated activities introduced for cryptoassets relating to:

• issuing qualifying stablecoins;
• safeguarding qualifying cryptoassets and relevant specified investment cryptoassets;
• operating a qualifying cryptoasset trading platform;
• dealing in qualifying cryptoassets as principal and as agent;
• arranging deals in qualifying cryptoassets; and
• qualifying cryptoasset staking.

Whilst the changes now introduced are broadly in line with the April 2025 Draft, a number of refinements have been proposed, as follows:

• HMT has provided further clarity on when a firm will be “issuing qualifying stablecoins”, with prescriptive details on when a firm will or will not be within scope of regulation. This includes when a firm “offers, or arranges for another to offer, a qualifying stablecoin for sale or subscription in the UK or has previously done so”. In addition, HMT has clarified that minting a qualifying stablecoin, where it first exists (a) as an identifiable asset on the blockchain and (b) in a transferable form, does not fall within scope of the activity of issuing. This expanded definition will help stablecoin issuers identify whether they fall under the new regime.
• In relation to the activity of safeguarding, the Draft Cryptoasset Legislation now makes clear that firms involved with “title transfer cryptoasset arrangements” are not automatically within scope of the activity of safeguarding, when they hold cryptoassets on that basis (note title transfer cryptoasset arrangements for consumers will be within scope). This is in line with the existing regime for traditional investments.
• For the regulated activity of dealing, a “holding out” test has been explicitly introduced meaning that firms must “hold out” that they carry on the activity of dealing, by way of business, to clients.   In essence, this limits principal dealing to business like activity and makes the scope of this regulated activity much narrower. This is similar to the existing regime for traditional investment services where “holding out” is required.
• In relation to the activity of qualifying cryptoasset staking, new exclusions have been introduced for firms acting as technical service providers (for example firms who simply provide technology services) and for activities carried on by a firm for the sale of goods or the supply of services. This is a new and welcomed development for a number firms and will also apply to other in scope regulated activities (not just those persons carrying on qualifying cryptoasset staking).

Territorial scope

The territorial scope of the new regime remains as originally intended in the April 2025 Draft. In particular:

• Stablecoin issuers are in scope where they carry on activity from a UK establishment (regardless of customer location).
• Cross border activity directed at, or made available to, UK consumers brings overseas providers within UK jurisdiction. Cross border activity to those that are not consumers are not within scope, as originally set out in the April 2025 Draft. This will be relevant to most firms such as arrangers, dealers, custodians and those arranging staking that carry on business with UK customers such as overseas cryptoasset platforms and custody providers.
• Admission of a qualifying cryptoasset to a UK authorised trading platform triggers the UK market conduct (including market abuse) obligations for relevant persons (i.e the person responsible for the offer, or, the intermediary through whom the qualifying cryptoasset is being bought or subscribed for), even if the issuer or offeror is overseas.

Purely technical services, without holding out as providing cryptoasset services and intra-group back office arrangements remain out of scope, as originally intended.

Public offers and admissions to trading

One of the most significant changes relates to how cryptoassets are offered and listed in the UK. For the first time, the UK will introduce a structured regime for public cryptoasset offerings, broadly comparable to how securities offerings are regulated, with the introduction of a new designated activities regime governing public offers of qualifying cryptoassets and admissions to trading on qualifying cryptoasset trading platforms. This was envisaged in the 2023 Consultation and HMT has carried forward the proposals it had set out. In summary, offering qualifying cryptoassets to the public in the UK, communicating advertising relating to such offers or admissions, and making related disclosures will be designated activities.  This means that these activities are within the purview of the FCA even if they are not regulated activities in itself, and in turn, will be subject to FCA oversight and requirements.

In particular, public offers (i.e offering to the general public) of qualifying cryptoassets will be unlawful unless there is an FCA approved prospectus, or they fall within certain exemptions. Exemptions proposed under the Draft Cryptoasset Legislation include those relating to small offers up to £1,000,000 over 12 months, offers solely to qualified investors, offers to fewer than 150 offerees (other than qualified investors), offers with a minimum of £100,000 consideration per investor, certain offers of qualifying stablecoins by authorised issuers, and offers conditional on or following admission to trading. The 2023 Consultation had stated that exemptions would be available, however this is the first time we have seen the full scope of the exemptions.

Where an exemption applies and the consideration being offered in the UK equals or exceeds £500,000 then material information addressed to potential investors will need to be incorporated into a qualifying cryptoasset disclosure document or otherwise disclosed to all offerees – this is a new requirement that was not originally envisaged in the 2023 Consultation.

Disclosure, liability and investor protections

The new regulatory framework intentionally reflects key investor protection principles derived from traditional financial markets, tailored to the context of cryptoassets. The 2023 Consultation had included a proposed disclosure regime, and the Draft Cryptoasset Legislation carries across a number of the proposals. 

As originally consulted, Draft Cryptoasset Legislation carries across the following:

• Disclosure documents will be required to contain information material to an investment decision, including features and rights, underlying technology and governance, creation/destruction/distribution mechanisms, conflicts, risk factors, any stable value mechanism for qualifying stablecoins (including backing assets and algorithms), relevant information about the person responsible for the offer, creators or issuers, control dynamics and underlying assets.
• Civil liability will attach to untrue or misleading statements or required omissions in disclosure documents, and to failures to publish required supplementary disclosure. In particular, the regime has been clarified and now introduces civil liability for persons responsible for cryptoasset disclosure documents where:
  • information is false or misleading; or
  • there is a material omission; and
  • an investor suffers loss as a result.

Whilst not set out in the 2023 Consultation, HMT has clarified that liability may be limited where the person reasonably believed (and continued to believe) the statement was true or the omission was valid, where timely corrections are made, for properly attributed expert statements, and for “protected forward looking statements”, absent knowing or reckless misconduct. Furthermore, for certain public offers of cryptoassets, the regime provides statutory investor withdrawal rights. This is a new protection for UK cryptoasset investors and aligns with consumer protection principles seen in other financial products.

Cryptoasset market abuse

HMT is moving forward with its proposal to create a dedicated cryptoasset market abuse regime, prohibiting insider dealing, unlawful disclosure of inside information, and market manipulation in relation to qualifying cryptoassets admitted (or applying) to UK authorised trading platforms and related instruments.

Under this regime, inside information mirrors established tests under traditional markets, tailored to cryptoasset market actors, including issuers of qualifying stablecoins and persons responsible for offers and platform operators – in practice information that is “specific or precise” and “has not been made public” will be inside information, and will be controlled in a manner in line with the market abuse regime. Market manipulation will capture false or misleading signals, price fixing at abnormal levels, fictitious devices, deceptive practices, manipulative benchmark inputs and specific behaviours such as abusive order strategies (including algorithmic/high frequency strategies), dominant position abuses and conflicted media opinions.

This level of detail was not included in the original 2023 Consultation, and as such, the granularity set out in the Draft Cryptoasset Legislation will be helpful for firms assessing their obligations.

Other regulatory regimes

HMT has also amended adjacent UK financial services regulatory regimes. In particular:

• Electronic money regime - stablecoins and their backing assets will be excluded from the definition of “electronic money” avoiding overlap with the existing regime. The 2023 Consultation had envisaged changes to the electric money regime and as such, this clarity is helpful.
• Investment funds and collective investment schemes regime - the Draft Cryptoasset Regulations make targeted changes to the UK collective investment scheme and alternative investment fund manager frameworks to ensure that certain stablecoin arrangements are not inadvertently captured, by introducing new exclusion for certain stablecoin backing structure.  
• AML regime - the FCA will maintain a register of cryptoasset exchange and custodian wallet providers who are not authorised firms.  We expect the types of firms to fall within this category to be very limited, particularly those firms that issue or arrange activities in relation to non-fungible tokens (i.e NFTs).
• Payment services regime - as expected, issuing qualifying stablecoins will not be a regulated payment service. The government confirmed this was the case in November 2024, however this is the first time we have seen this in legislation.
• Prudential regime - IFPR definitions will be updated so IFPR financial institutions include firms undertaking the new cryptoasset regulated activities, in turn having an impact on the capital requirements of these firms. This is a new but welcomed development.
• Financial promotions regime - the current bespoke cryptoasset financial promotions regime is being removed, with the regime now integrated into the broader framework.

FCA powers, rulemaking and enforcement

The FCA has gained extensive rulemaking and enforcement powers through the Draft Cryptoasset Legislation, which was generally envisaged to be the case under the 2023 Consultation. In particular, the FCA:

• As mentioned above, may make designated activity rules across the public offer/admission and market abuse regimes, including liability frameworks and civil liability exclusions. It may dispense with or modify rules on a case by case basis and issue directions relating to designated activities.
• May publish decisions to disapply or modify rules and may recognise legitimate market practices against a detailed set of integrity, transparency, liquidity and innovation criteria.
• Gains ancillary enforcement related powers linked to its rules, which now cover cryptoasset firms.

Transitional and savings provisions

Under the new regime, transitional measures create a structured, time limited glide path into authorisation where the FCA must set a relevant application period (minimum 28 days, ending at least 28 days before full commencement) and may extend it, though firms can also apply outside that window.  

Where an application made in that period is undecided or refused but still “open to review,” a saving provision (as it is referred to in the Draft Cryptoasset Legislation) treats the firm (and certain overseas group members) as if Parts 3–6 of the Draft Cryptoasset Legislation had not commenced for that activity, for up to two years from full commencement, with overseas person notification duties to the FCA.  

If an application is refused (no longer open to review) or withdrawn, or if it was made outside the period but before commencement and is pending/refused/withdrawn, firms enter a pre-existing contracts transitional which is a temporary exemption strictly to perform only contracts entered into before the defined “relevant day,” subject to FCA variation/cancellation powers (including setting an earlier “final day”), mandatory notifications to the FCA and counterparties, and a limited modification to the financial promotions restriction to allow communications necessary to perform those contracts.  During this period, the FCA’s information gathering, publication, and public censure powers apply as if the person were authorised, reinforcing supervisory oversight. 

Both the saving and transitional regimes sunset two years after the full commencement day (25 October 2027), ensuring the runoff is finite and orderly.

Concluding remarks

The Draft Cryptoasset Legislation shifts cryptoassets from fragmented oversight to a coherent, prudential regulatory framework. It extends the regime to cover cryptoasset activities, creates a designated activities regime for offers and admissions, aligns financial promotions, and introduces a dedicated market abuse regime importing mainstream disclosure, liability and conduct standards

For firms, the implications are clear: stablecoin issuance, custody, trading platforms, dealing/arranging and staking will be regulated, with practical scope refinements and exclusions. Public offers and admissions will require structured disclosures with civil liability (tempered by safe harbours), and promotions must be tightly controlled.

Implementation runs to 25 October 2027 with conditional transitional pathways; timely authorisation and robust controls are essential to maintain continuity and mitigate conduct and enforcement risk. Immediate priorities for firms is to map in scope activities (including cross border reach), build issuer grade governance, surveillance and disclosure, and prepare documentation for UK listings or offers.