From experiment to infrastructure
04 Feb 2026
Tahlia Kraefft examines how as the United Kingdom’s approach to cryptocurrency regulation shifts from minimal oversight to a comprehensive financial services framework regime, is the regulation a brake on innovation or structure for scale?
Image: alexey_novikov/stock.adobe.com
UK’s cryptoasset turning point
A flurry of legal developments through 2025 and early 2026, has seen the UK tighten its regulatory frameworks for compliance to bring cryptocurrency firms under a comprehensive financial regime. The strengthening of UK cryptocurrency regulatory frameworks marks a definitive turning point for institutional adoption, transitioning digital assets from speculative, niche products into recognised, regulated financial instruments. As the regulation is implemented, asset servicers will play a key role in bridging the gap between traditional finance and digital assets, beyond being custodians, to function as broad compliance, security, and administrative partners.
Regulatory reset
Cryptoassets will be regulated under major legislation to go live on 25 October 2027, as the government asserts the UK’s ambitions to be a global hub for digital asset investment, through strengthening consumer protection, and fostering market integrity. The UK has moved to bring crypto activities under the established financial services regulatory perimeter for the first time, aligning crypto with traditional finance rules. The future regulatory regime for cryptoassets will see the instruments fall under the scope of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. The final legislation was laid out before parliament on 15 December last year. A pivotal moment in UK crypto rules development, the framework will replace the existing money laundering regime, intending to overcome gaps in consumer protection and inconsistent oversight.
Under the legislation, the UK Financial Conduct Authority (FCA) will oversee wider conduct, reporting, protection standards and enforcement. Additionally the introduction of the Senior Managers and Certification Regime (SM&CR) for cryptoasset firms, will line the industry up with traditional financial services. Senior managers will need to be FCA-approved with accountability across key areas such as compliance, technology, and operational resilience.
Nick Jones, CEO and founder of Zumo, argues the regulatory frameworks walk a tight rope between driving innovation and safety: “Businesses will now have greater clarity on what it means to operate a cryptoasset business in the UK; consumers will have specific assurances related to how their assets are held, as well as a tangible set of investor protections and the assurance of interfacing with regulated businesses held to the stringent standard of UK financial services.
“There’s already a strong retail investor appetite across the UK, and this hunger will grow as the regulatory regime comes into effect.
“For balance’s sake, we now need business-model-aware implementation support, realistically designed bedding-in provisions, and a clear communication of regulatory expectations to ensure that a full spectrum of cryptoasset businesses can continue to serve the UK market.”
Charlotte Wilson, partner at Mischon de Reya, comments the regulations provide clear legal boundaries through: “Giving certainty required to invest and innovate whilst allowing consumers strong protections. Robust investor safeguards are seen as prerequisites for building the market confidence necessary to attract institutional capital and mainstream adoption.
“Anti-fraud mechanisms include comprehensive disclosure requirements, market abuse prohibitions, anti-money laundering compliance, and enhanced oversight capabilities that make it easier to detect suspicious activity and hold firms to account.”
The regulator is engaging industry participants in ongoing consultations which set out detailed implementation of the future regulatory regime for cryptoassets, open until 12 February.
Jones praises the consultation proceedings, noting: “It’s fair to say that the UK has benefitted from a more systemic, phased, and predictable consultation process via the FCA’s crypto roadmap compared to the generally more fragmented, enforcement-led approach that we’ve seen in other jurisdictions.
“The clearly mapped timeline of consultation papers plots out the route to arriving at a regulatory regime that takes all stakeholders’ ideas and concerns into account. I believe this will help us to avoid the current issues seen in the US, where Coinbase’s decision to withdraw support for the CLARITY Act sent significant shockwaves through the sector.
“And by legislating to extend existing financial regulation to companies involved in crypto, rather than producing a complicated suite of rules tailored to the industry as seen with the EU’s Markets in Crypto-Assets Regulation (MiCA), policymakers are making it clear they believe digital assets can successfully coexist with fiat money in our future financial system. That’s a compelling vote of confidence.”
Jones says he believes policymakers aim for the comprehensive regulatory regime to act as a bedrock for a thriving cryptoasset business ecosystem in the UK: “The industry has been waiting for some time for the UK to make good on its often-stated ‘UK Crypto Hub’ ambition, loudly lobbying for the appropriate regulatory framework to facilitate new avenues of economic growth.
“The main ask has been for operational clarity that will allow cryptoasset business to develop in the UK at scale and so the current direction of travel is extremely encouraging.”
Wilson argues: “The UK framework strikes a careful balance between fostering innovation and ensuring robust consumer protection. By establishing clear regulatory standards whilst maintaining proportionate requirements, it seeks to create the certainty needed to attract responsible innovators and institutional capital, positioning the UK as a trusted jurisdiction where safety and innovation can coexist and thrive.”
Digital assets under financial services regulatory umbrella
Through the future regulatory regime for cryptoassets framework, stablecoins will be regulated in a similar manner to traditional financial instruments, providing legal clarity with the potential to boost institutional confidence and broader use.
Firms operating regulated cryptoasset activities will now require full FCA authorisation with specific crypto permission, including holding regulatory capital and adhering with FCA principles. Activities included under the umbrella of the regulation include: issuing qualifying stablecoins in the United Kingdom, operating cryptoasset trading platforms, dealing in cryptoassets (as principal or agent), arranging cryptoasset transactions, safeguarding, and custody of cryptoassets, and qualifying staking. Clear regulation increases the adoption of crypto products by institutional investors, pension funds, and other heavily regulated entities.
The FCA has loosened restrictions on retail access to cryptocurrency exchange traded notes (ETNs) in October 2025, in response to industry and political pressure. The reversing of the ban that has been in force since January 2021, reflects a maturation of the market. Furthermore, the approval of the Property (Digital Assets etc.) Act — granted Royal asset in December 2025 — will see digital assets to be categorised as a distinct form of personal property under UK law, providing legal assurance for market participants.
Jones, remarks: “With much greater certainty in law thanks to the Property (Digital Assets etc) Act, in regulation, and in serviceable business, to put it simply there has never been a better time for cryptoasset businesses to realise UK opportunities at scale.
“But it’s important to note it’s also the end of an era: of offshore provision, of start-up style business processes, and of unregulated business models. What’s now urgently needed is the UK-compliant infrastructure and the UK routes to market that can accommodate new levels of operating obligations.
“Once that’s in place, responsible providers will thrive while bad actors retreat.”
Wilson notes the framework provides important regulatory infrastructure for the UK establishing its credibility as a global crypto hub, via: “Clear definitions, FCA oversight, and consumer protections that are crucial to attracting institutional participation. Whether this translates into meaningful market leadership depends on timely implementation, addressing remaining gaps, and maintaining proportionality that supports innovation.
“The critical question is whether thorough deliberation yields sufficiently superior rules to offset first-mover disadvantages. Innovators require not just clear rules, but timely clarity—prolonged uncertainty is itself a deterrent.
“The regime’s success depends less on the quality of final rules than on whether those rules arrive soon enough, and prove flexible enough, to compete for the innovation already establishing itself elsewhere.”
Greater demand for asset servicing infrastructure
Against these regulatory changes in the digital asset landscape, the role of asset servicers will shift from being optional to required, with a focus on delivering robust custody and safeguarding of cryptoassets.
The framework brings increased demands for regulated digital asset custody, requiring higher standards for record-keeping, segregation, and reconciliation, as crypto services are aligned with traditional asset servicing expectations. It also opens up opportunities for traditional custodians to expand their operations into digital assets. New disclosure obligations and market abuse frameworks will enhance transparency and orderliness of the market, favourable to service providers.
An increased number of crypto funds and tokenised vehicles will require NAV calculation, pricing, and reporting putting more demand on fund administration.
Valuation obstacles increase pressure for specialised data and controls. While tokenisation generates new servicing models it also creates operational complexity. Asset servicers will operate as bridges connecting blockchain infrastructure and traditional finance systems.
Compliance with frameworking including Know Your Customer (KYC), and anti-money laundering (AML), transaction monitoring, and reporting obligations also push demand on Compliance as a Service (Caas) will also create opportunities for regulatory technology-enabled solutions.
Challenges
There is concern from some industry members who say the strict framework requirements could hamper innovation particularly for stablecoin and decentralised finance (DeFi), including the risk of innovation being pushed to less regulated jurisdictions if the laws become overly restrictive. For smaller digital asset firms they may be met with higher compliance costs and barriers to market entry. There is uncertainty around the developing rules for DeFi and decentralised models. Amongst traditional asset servicers there are operational readiness gaps.
New era
The UK’s cryptocurrency regulatory development represents the end of regulatory ambiguity, marking a clear shift from crypto not sitting adjacent to the financial system but rather fully integrated into it. Alongside the recognition of crypto as personal property and strict custody rules, the framework provides legal certainty and lowers the risk barrier to encourage institutional participation. Asset servicers will take on a larger role in this context, providing key market infrastructure for custody and the safeguarding of cryptoassets. With the framework’s potential to attract institutional capital and keep corrupt actors out, it will also place higher standards on the sector to meet governance and accountability benchmarks.
While the regulation could position the UK well as a global player in the digital finance landscape, this will come down to its implementation.
A flurry of legal developments through 2025 and early 2026, has seen the UK tighten its regulatory frameworks for compliance to bring cryptocurrency firms under a comprehensive financial regime. The strengthening of UK cryptocurrency regulatory frameworks marks a definitive turning point for institutional adoption, transitioning digital assets from speculative, niche products into recognised, regulated financial instruments. As the regulation is implemented, asset servicers will play a key role in bridging the gap between traditional finance and digital assets, beyond being custodians, to function as broad compliance, security, and administrative partners.
Regulatory reset
Cryptoassets will be regulated under major legislation to go live on 25 October 2027, as the government asserts the UK’s ambitions to be a global hub for digital asset investment, through strengthening consumer protection, and fostering market integrity. The UK has moved to bring crypto activities under the established financial services regulatory perimeter for the first time, aligning crypto with traditional finance rules. The future regulatory regime for cryptoassets will see the instruments fall under the scope of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. The final legislation was laid out before parliament on 15 December last year. A pivotal moment in UK crypto rules development, the framework will replace the existing money laundering regime, intending to overcome gaps in consumer protection and inconsistent oversight.
Under the legislation, the UK Financial Conduct Authority (FCA) will oversee wider conduct, reporting, protection standards and enforcement. Additionally the introduction of the Senior Managers and Certification Regime (SM&CR) for cryptoasset firms, will line the industry up with traditional financial services. Senior managers will need to be FCA-approved with accountability across key areas such as compliance, technology, and operational resilience.
Nick Jones, CEO and founder of Zumo, argues the regulatory frameworks walk a tight rope between driving innovation and safety: “Businesses will now have greater clarity on what it means to operate a cryptoasset business in the UK; consumers will have specific assurances related to how their assets are held, as well as a tangible set of investor protections and the assurance of interfacing with regulated businesses held to the stringent standard of UK financial services.
“There’s already a strong retail investor appetite across the UK, and this hunger will grow as the regulatory regime comes into effect.
“For balance’s sake, we now need business-model-aware implementation support, realistically designed bedding-in provisions, and a clear communication of regulatory expectations to ensure that a full spectrum of cryptoasset businesses can continue to serve the UK market.”
Charlotte Wilson, partner at Mischon de Reya, comments the regulations provide clear legal boundaries through: “Giving certainty required to invest and innovate whilst allowing consumers strong protections. Robust investor safeguards are seen as prerequisites for building the market confidence necessary to attract institutional capital and mainstream adoption.
“Anti-fraud mechanisms include comprehensive disclosure requirements, market abuse prohibitions, anti-money laundering compliance, and enhanced oversight capabilities that make it easier to detect suspicious activity and hold firms to account.”
The regulator is engaging industry participants in ongoing consultations which set out detailed implementation of the future regulatory regime for cryptoassets, open until 12 February.
Jones praises the consultation proceedings, noting: “It’s fair to say that the UK has benefitted from a more systemic, phased, and predictable consultation process via the FCA’s crypto roadmap compared to the generally more fragmented, enforcement-led approach that we’ve seen in other jurisdictions.
“The clearly mapped timeline of consultation papers plots out the route to arriving at a regulatory regime that takes all stakeholders’ ideas and concerns into account. I believe this will help us to avoid the current issues seen in the US, where Coinbase’s decision to withdraw support for the CLARITY Act sent significant shockwaves through the sector.
“And by legislating to extend existing financial regulation to companies involved in crypto, rather than producing a complicated suite of rules tailored to the industry as seen with the EU’s Markets in Crypto-Assets Regulation (MiCA), policymakers are making it clear they believe digital assets can successfully coexist with fiat money in our future financial system. That’s a compelling vote of confidence.”
Jones says he believes policymakers aim for the comprehensive regulatory regime to act as a bedrock for a thriving cryptoasset business ecosystem in the UK: “The industry has been waiting for some time for the UK to make good on its often-stated ‘UK Crypto Hub’ ambition, loudly lobbying for the appropriate regulatory framework to facilitate new avenues of economic growth.
“The main ask has been for operational clarity that will allow cryptoasset business to develop in the UK at scale and so the current direction of travel is extremely encouraging.”
Wilson argues: “The UK framework strikes a careful balance between fostering innovation and ensuring robust consumer protection. By establishing clear regulatory standards whilst maintaining proportionate requirements, it seeks to create the certainty needed to attract responsible innovators and institutional capital, positioning the UK as a trusted jurisdiction where safety and innovation can coexist and thrive.”
Digital assets under financial services regulatory umbrella
Through the future regulatory regime for cryptoassets framework, stablecoins will be regulated in a similar manner to traditional financial instruments, providing legal clarity with the potential to boost institutional confidence and broader use.
Firms operating regulated cryptoasset activities will now require full FCA authorisation with specific crypto permission, including holding regulatory capital and adhering with FCA principles. Activities included under the umbrella of the regulation include: issuing qualifying stablecoins in the United Kingdom, operating cryptoasset trading platforms, dealing in cryptoassets (as principal or agent), arranging cryptoasset transactions, safeguarding, and custody of cryptoassets, and qualifying staking. Clear regulation increases the adoption of crypto products by institutional investors, pension funds, and other heavily regulated entities.
The FCA has loosened restrictions on retail access to cryptocurrency exchange traded notes (ETNs) in October 2025, in response to industry and political pressure. The reversing of the ban that has been in force since January 2021, reflects a maturation of the market. Furthermore, the approval of the Property (Digital Assets etc.) Act — granted Royal asset in December 2025 — will see digital assets to be categorised as a distinct form of personal property under UK law, providing legal assurance for market participants.
Jones, remarks: “With much greater certainty in law thanks to the Property (Digital Assets etc) Act, in regulation, and in serviceable business, to put it simply there has never been a better time for cryptoasset businesses to realise UK opportunities at scale.
“But it’s important to note it’s also the end of an era: of offshore provision, of start-up style business processes, and of unregulated business models. What’s now urgently needed is the UK-compliant infrastructure and the UK routes to market that can accommodate new levels of operating obligations.
“Once that’s in place, responsible providers will thrive while bad actors retreat.”
Wilson notes the framework provides important regulatory infrastructure for the UK establishing its credibility as a global crypto hub, via: “Clear definitions, FCA oversight, and consumer protections that are crucial to attracting institutional participation. Whether this translates into meaningful market leadership depends on timely implementation, addressing remaining gaps, and maintaining proportionality that supports innovation.
“The critical question is whether thorough deliberation yields sufficiently superior rules to offset first-mover disadvantages. Innovators require not just clear rules, but timely clarity—prolonged uncertainty is itself a deterrent.
“The regime’s success depends less on the quality of final rules than on whether those rules arrive soon enough, and prove flexible enough, to compete for the innovation already establishing itself elsewhere.”
Greater demand for asset servicing infrastructure
Against these regulatory changes in the digital asset landscape, the role of asset servicers will shift from being optional to required, with a focus on delivering robust custody and safeguarding of cryptoassets.
The framework brings increased demands for regulated digital asset custody, requiring higher standards for record-keeping, segregation, and reconciliation, as crypto services are aligned with traditional asset servicing expectations. It also opens up opportunities for traditional custodians to expand their operations into digital assets. New disclosure obligations and market abuse frameworks will enhance transparency and orderliness of the market, favourable to service providers.
An increased number of crypto funds and tokenised vehicles will require NAV calculation, pricing, and reporting putting more demand on fund administration.
Valuation obstacles increase pressure for specialised data and controls. While tokenisation generates new servicing models it also creates operational complexity. Asset servicers will operate as bridges connecting blockchain infrastructure and traditional finance systems.
Compliance with frameworking including Know Your Customer (KYC), and anti-money laundering (AML), transaction monitoring, and reporting obligations also push demand on Compliance as a Service (Caas) will also create opportunities for regulatory technology-enabled solutions.
Challenges
There is concern from some industry members who say the strict framework requirements could hamper innovation particularly for stablecoin and decentralised finance (DeFi), including the risk of innovation being pushed to less regulated jurisdictions if the laws become overly restrictive. For smaller digital asset firms they may be met with higher compliance costs and barriers to market entry. There is uncertainty around the developing rules for DeFi and decentralised models. Amongst traditional asset servicers there are operational readiness gaps.
New era
The UK’s cryptocurrency regulatory development represents the end of regulatory ambiguity, marking a clear shift from crypto not sitting adjacent to the financial system but rather fully integrated into it. Alongside the recognition of crypto as personal property and strict custody rules, the framework provides legal certainty and lowers the risk barrier to encourage institutional participation. Asset servicers will take on a larger role in this context, providing key market infrastructure for custody and the safeguarding of cryptoassets. With the framework’s potential to attract institutional capital and keep corrupt actors out, it will also place higher standards on the sector to meet governance and accountability benchmarks.
While the regulation could position the UK well as a global player in the digital finance landscape, this will come down to its implementation.
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