The United Kingdom is taking significant strides to regulate its burgeoning cryptocurrency sector, as new proposals aim to impose stricter rules on virtual asset companies. On April 29, 2025, the UK Treasury Department, headed by Chancellor Rishi Reif, unveiled a draft law that outlines how cryptocurrency exchanges, custodians, and investment services will operate under formal regulation. This initiative is part of the government's broader strategy to promote innovation while safeguarding consumers against potential risks.
According to Rishi Reif, the aim is to make Britain the best place in the world for innovation and the safest environment for consumers. He stated, "Through our approach to regulation, we will boost investor confidence, support the growth of financial technology, and protect the public across the UK." This new framework reflects the government's commitment to enhancing consumer protection and maintaining the UK's competitive edge in the global financial landscape.
The proposed regulations will require cryptocurrency companies offering services to UK customers to adhere to stringent transparency and operational standards, similar to those applied to traditional financial institutions. The law will encompass not only exchanges and intermediaries but also custodians and other operators in the cryptocurrency space.
Under the draft law, companies providing cryptocurrency-related services must ensure that they comply with clear guidelines regarding the management of supporting assets to protect their value. This includes the safe storage of private keys, maintaining transparency, and managing risks effectively. Any company that facilitates cryptocurrency transactions must operate under strict fraud protection measures.
For the first time, stablecoin issuers will also be subject to regulation. These companies will need to fulfill rigorous requirements concerning how they hold and manage the assets backing their currencies, ensuring stability and consumer trust. The government has implemented certain exemptions to prevent overreach; for example, activities such as the development of cryptocurrencies or facilitating private transfers without public requests will not automatically trigger regulation.
Additionally, foreign companies that provide services to UK consumers may also fall under these regulations if they lack proper organization. This means that international platforms targeting UK users directly could be required to comply with the new rules.
As part of the ongoing efforts to combat illicit activities, the UK government has recently bolstered its enforcement capabilities. New powers under the Economic Crime and Corporate Transparency Act, introduced in April 2024, allow authorities to freeze suspicious cryptocurrency wallets for up to three years, even before any charges are filed. Since the implementation of this law, approximately £6 million (around $7.7 million) worth of cryptocurrencies have been frozen by law enforcement agencies, including the Revenue and Customs Authority and local police, as reported by MailOnline.
This regulatory push comes at a time when the number of adults in the UK owning cryptocurrencies has surged to 12%, a significant increase from just 4% in 2021. This sharp rise has raised concerns about fraud and unclear practices within the sector. The government hopes that by establishing a clear regulatory framework, it will enhance investor confidence and protect the public from harmful actors.
The introduction of this draft law is part of a broader initiative to foster growth by attracting investment and supporting innovation within the financial technology sector. Officials are optimistic that the UK is poised to become a global leader in digital finance.
While the UK moves swiftly to establish its regulatory framework, progress in the United States has been less decisive. Currently, there are no explicit regulations governing cryptocurrencies or stablecoins in the US. However, Congress is working on creating a framework based on requests from former President Donald Trump. Recently, the Senate Banking Committee advanced a draft bill concerning stablecoins, known as the Genius Act, while the House Financial Services Committee has introduced its version titled the "Stabilization Act." A final vote is expected soon, which could clarify how these assets are regulated and who is authorized to issue them.
Reports indicate that Rishi Reif has met with US Treasury Secretary Scott Peasant to discuss potential areas of alignment between the two nations. One proposal includes the establishment of a transatlantic regulatory sandbox for digital securities, a concept backed by SEC Commissioner Hester Peirce. This initiative would enable British and American companies to test and develop digital assets under a common regulatory framework.
However, the regulatory gap may continue to widen until the US takes decisive action regarding stablecoin regulations and the classification of digital assets. Meanwhile, the European Union has made headway with its Markets in Crypto-Assets (MiCA) framework, which aims to establish clear rules for cryptocurrency operations across EU member states. This legislation, which has been in the works since December, is designed to protect consumers, maintain market integrity, and promote the growth of blockchain technology.
The UK’s new draft law positions the country favorably in the competitive landscape of digital finance. If finalized soon, it could attract major players to the UK and eliminate the confusion that has surrounded the cryptocurrency trading sector. As the UK accelerates its regulatory efforts, the US appears to be lagging, while the EU continues to advance its regulatory framework. The coming months will be crucial in determining whether cooperation between the UK and the US can match the progress made in Europe.
