Crypto Regulations in the United Kingdom 2025

The United Kingdom is moving toward stronger cryptocurrency regulations. The government is working on new rules to avoid penalties and ensure safe use of digital assets. These rules aim to support new technology while protecting users and keeping markets stable.Crypto is becoming more popular in the UK, and the UK crypto market is expected to reach $1.6 billion in revenue. This leads to an important question: What changes in UK crypto regulations are driving this growth?Table of contentsKey Regulatory Developments in 2025Who Regulates Cryptocurrency in the UK?Crypto Taxation in the UK (2025)Investors & TradersCrypto CompaniesCrypto Licensing Rules for UK CompaniesCrypto Adoption Rate in the UK (2025)UK Government’s Stance on CryptocurrencyFinal ThoughtsFAQsKey Regulatory Developments in 2025June 2025 – Financial Conduct Authority (FCA) Creating Crypto Regulatory Framework Officials are conducting discussions to create a new regulatory framework for crypto. Looking forward to regulating trading platforms, intermediaries, and activities like staking and lending. May 28, 2025 – FCA Proposals on Stablecoins and CustodyThe Financial Conduct Authority (FCA) published proposals to regulate:Stablecoin issuanceCrypto custody servicesFinancial resilience of crypto firmsThese proposals aim to ensure stablecoins maintain their value and provide transparency around asset backing. The FCA is also considering incorporating stablecoin regulation into its innovation services and plans to coordinate closely with the Bank of England.Feedback deadline: July 31, 2025Final rules expected: 2026May 7, 2025 – Bank of England on StablecoinsSarah Breeden, Deputy Governor for Financial Stability at the Bank of England, emphasized the importance of stablecoins in modern payment systems. She confirmed the review of a viable model for integrating stablecoins into the UK’s payment rails. The related bill passed its third reading in Parliament on May 8 without changes.May 2, 2025 – FCA Discussion Paper (DP25/1)The FCA released a discussion paper exploring regulation around:Cryptoasset activitiesTrading platformsStaking servicesThe paper seeks industry feedback for future regulatory developments.April 29, 2025 – HM Treasury Draft Statutory InstrumentHM Treasury published a draft statutory instrument outlining:Rules for issuing stablecoinsCustody of digital assetsGuidelines for crypto trading platforms and transactionsMarch 18, 2025 – Digital Security Sandbox (DSS) RestrictionsThe Treasury and Debt Management Office (DMO) confirmed that unbacked cryptocurrencies and stablecoins are excluded from the DSS program unless expressly approved by the Bank of England and FCA.February 4, 2025 – House of Lords Property BillThe House of Lords Committee Stage of the Property Bill clarified legal treatment of:Crypto tokensCollateral arrangementsThis update strengthens the legal framework surrounding digital assets.January 30, 2025 – DSS AmendmentThe UK government updated the DSS regulations following the Financial Services and Markets Act 2023. Key changes:Imposed anti-money laundering (AML) and counter-terrorist financing (CTF) rules on crypto firmsReinforced a risk-based approach to fraud preventionJanuary 9, 2025 – Financial Services and Markets Act 2000 AmendmentParliament officially amended the FSMA 2000, categorizing:“Qualifying crypto assets”“Qualifying stablecoins”as regulated investments within the UK’s financial perimeter.Who Regulates Cryptocurrency in the UK?The Financial Conduct Authority (FCA) is the main regulatory body overseeing cryptoassets. It ensures compliance with AML and CTF standards.Prominent platforms like Coinbase and Gemini are registered with the FCA as Virtual Asset Service Providers (VASPs), offering secure and transparent crypto services to UK users.Additionally, HM Treasury and the Bank of England contribute significantly to shaping the nation’s digital asset regulations. The FCA also enforces strict advertising standards to ensure crypto promotions are clear, fair, and not misleading.Crypto Taxation in the UK (2025)Investors & TradersTax TypeRate/AllowanceTaxable EventsReportingCapital Gains Tax (CGT)18% (basic), 24% (higher)Selling, trading, spending, or gifting crypto (not to spouse)Gains over £3,000 must be reported to HMRCIncome Tax0–45% based on income bandsMining, staking, airdrops, crypto paymentsIncome over £12,570 must be reportedLossesOffset against gainsCan reduce CGT liabilityMust be reported to HMRCExemptionsN/AHolding, transferring between own wallets, or gifting to spouseNot reportableNote: Crypto exchanges must share user data with HMRC. Failure to report taxable events may result in penalties.Crypto CompaniesTax TypeRate/AllowanceTaxable EventsReportingCorporation Tax25% (2025 rate)Profits from crypto-related businessAnnual returns to HMRCVATGenerally exemptApplies only to some servicesVAT returns if applicableFCA RegistrationMandatoryAML/CTF compliance, licensing requiredOngoing compliance and record keepingPayroll TaxPAYE/NICCrypto used to pay employeesMust be reportedRecord KeepingMandatoryFull transaction logs, KYC/AML dataSubject to FCA and HMRC auditCrypto Licensing Rules for UK CompaniesAspectDetailsRegulatory PerimeterApplies to exchanges, custodians, brokers, staking providers, stablecoin issuersMandatory LicensingRequired for all firms serving UK retail customers, including foreign companiesRegulated ActivitiesIncludes trading, custody, staking, and arranging crypto transactionsOverseas FirmsMust be UK-authorized if targeting UK retail clientsRequired StandardsMust meet standards on transparency, governance, risk, capital, and conductAML/CTF ComplianceFCA registration required for anti-money laundering obligationsImplementation TimelineDraft order published April 29, 2025; applications open for one yearPenaltiesNon-compliance may lead to enforcement, penalties, or criminal chargesCrypto Adoption Rate in the UK (2025)The UK has emerged as the fastest-growing country in terms of crypto adoption, according to Gemini’s “State of Crypto” report.Crypto user base: Over 23 million usersAdoption rate: 35.12%Revenue forecast: Over $1.6 billionComparison: Outpacing the US and France (both at 21%); second only to Singapore (28%)Notable trends:28% of UK investors started with memecoins41% of investors now hold spot crypto ETFs, placing the UK among the top ETF-adopting countries12% of the population currently owns crypto, though the risk of scams and fraud remains a concernUK Government’s Stance on CryptocurrencyThe UK government has not disclosed any official crypto holdings, but it supports legal crypto trading. While cryptocurrency is not legal tender, it is legal to buy, sell, or hold crypto assets under current UK regulations.Final ThoughtsThe UK is laying the foundation to become a global hub for cryptocurrency and digital assets. With robust legal frameworks, institutional clarity, and active efforts to foster innovation while ensuring consumer safety, the country is paving the way for a thriving crypto ecosystem. As these regulations unfold, the UK is set to play a defining role in shaping the future of crypto globally.Never Miss a Beat in the Crypto World!Stay ahead with breaking news, expert analysis, and real-time updates on the latest trends in Bitcoin, altcoins, DeFi, NFTs, and more. Subscribe to Crypto Regulation FAQsWhat is the UK’s crypto adoption rate in 2025? The UK has over 23 million crypto users, with a 35.12% adoption rate, leading Europe in crypto engagement. Who oversees cryptocurrency regulation in the UK? The FCA regulates cryptoassets, working with HM Treasury and the Bank of England on comprehensive frameworks. What is the UK tax on crypto? Capital gains tax applies at 18%–24%, while income tax (0%–45%) applies to mining, staking, and crypto earnings over £12,570.