Regulating cryptoassets in the UK: a guide to the road ahead

Finally! Avid readers of Freshfields blogs might remember from our post last autumn that the UK government and financial regulators in October 2023 announced plans for a phased approach to cryptoasset regulation in the UK. Since then, we have waited over a year for any updates (admittedly a period which covered a change in the UK government). Whilst we’ll still be waiting a couple of years for final rules, we were pleased to see that the FCA has published a detailed roadmap setting out its timeline for making cryptoassets a fully regulated asset class by 2026. The process will begin with discussion papers on market abuse as well as admission and disclosures during Q4 2024, with further discussion papers and consultation papers throughout 2025 and into 2026. The roadmap finishes with the publication of final policy statements and the opening of the regulatory gateway in 2026. 

The FCA roadmap follows a speech made on 21 November by Tulip Siddiq, the Economic Secretary to the Treasury, at the Tokenisation Summit, in which she said that the Labour government intends to proceed with the previous government's proposals to regulate cryptoassets. Rather than rolling out the regime in two phases as originally anticipated, the government intends to implement the new regime for stablecoins and other cryptoassets at the same time, and it has scrapped plans to bring stablecoins into UK payments regulation. The government says it will consult on draft legislation as soon as possible in 2025. It also plans to clarify some existing legal uncertainty by confirming that cryptoasset staking services do not constitute a collective investment scheme under financial services law.

Here is a provisional timeline of upcoming FCA policy publications based on the FCA's roadmap:

Q4 2024:

• Admissions and disclosures discussion paper 
  • Standards for admitting cryptoassets to trading platforms
  • Enhanced disclosure obligations for issuers, including liability frameworks and due diligence requirements
  • Use of a National Storage Mechanism (NSM) for storing and accessing critical disclosure documents
• Market abuse discussion paper 
  • Introduction of systems and controls to combat market manipulation.
  • Provisions for sharing market abuse information and disclosing insider information.

Q1/Q2 2025:

• Discussion paper(s) 
  • Trading platform rules: including location, access, matching and transparency requirements 
  • Intermediation rules: including order handling and execution requirements 
  • Lending rules: including ownership, access and disclosures 
  • Staking: including ownership and disclosures 
  • Prudential: considerations for cryptoasset exposures
• Consultation paper(s)
  • Stablecoins: covering backing assets, redemption processes
  • Custody: covering recordkeeping, reconciliations, segregation of assets and use of third parties
  • Prudential: introduction of a new prudential sourcebook, including capital, liquidity and risk management

Q3 2025:

• Consultation paper on conduct and firm standards for all Regulated Activities Order (RAO) activities 
  • Covering systems and controls including operational resilience and financial crime, consumer duty, complaints, conduct (COBS) and governance including Senior Managers and Certification Regime (SMCR)
  • Admissions and disclosures consultation paper: as per discussion paper
  • Market abuse consultation paper: as per discussion paper 

Q4 2025/Q1 2026:

• Consultation paper on trading platforms, intermediation, lending and staking: as per discussion paper, plus Resolution
• Consultation paper on remaining material for prudential sourcebook: including groups, reporting

2026:

• All policy statements published
• Gateway opens ahead of the regime going live

The FCA has also published a press release and a research note looking at cryptoasset holdings in the UK and consumers’ understanding, attitudes and behavioural patterns towards them. The research, which was carried out by YouGov on behalf of the FCA, shows that crypto ownership continues to grow in the UK. The FCA held a series of roundtables earlier in 2024 to gather views on how it should develop its approach to regulating specific areas of crypto, and it has summarised these discussions in a blog post. In addition, the FCA has published a new webpage on cryptoasset financial promotions and steps that regulated and registered firms should take to mitigate the risks associated with partnering with unregistered cryptoasset firms who appear to be illegally promoting.   

These developments follow the implementation of a regulatory framework for cryptoassets in the EU, where the Markets in Crypto-Assets Regulation (MiCA) regulation became applicable to issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs) on 30 June 2024 and will apply to crypto-asset service providers (CASPs) from 30 December 2024. The US is currently clarifying its own regulatory stance towards crypto assets through the Financial Innovation and Technology for the 21st Century Act (FIT 21), which was passed by the U.S. House of Representatives in May 2024. President-elect Donald Trump is expected to be highly pro-crypto during his second term. 

With the EU starting to bed down its new regime and the use of crypto expected to grow more quickly in the US, it is clearly time for the UK to act.  But there will be a lot of talking first, and while two years is a long time in politics, it is an eternity in cryptoland.