The United Kingdom is gearing up to roll out a comprehensive regulatory framework for crypto assets by early 2025, according to a statement from Treasury officials at the City & Financial Global Tokenisation Summit in London on November 21. While crypto regulations were initially expected earlier, the delay was caused by the general election and the shift in government leadership from the Conservatives to the Labour Party. Now, under the leadership of Keir Starmer’s Labour government, the UK is preparing to tackle the complexities of regulating cryptocurrency, stablecoins, and staking services.
A Long-Awaited Framework to Shape Crypto’s Future in the UK
Economic Secretary to the Treasury, Tulip Siddiq, confirmed that the UK’s crypto regulations will cover a broad range of topics, including stablecoins, staking services, and cryptocurrencies. Speaking at the summit, Siddiq emphasized that the government’s approach would be a phased one, saying, “Doing everything in a single phase is simpler and just makes more sense.” This is a shift from previous fragmented efforts, reflecting the need for a more unified and clear approach to crypto regulation.
Stablecoins, which are digital assets pegged to traditional currencies like the US dollar or the euro, have been a particularly contentious area. Siddiq noted that while stablecoins are used in many innovative ways, they don’t fit neatly into the existing regulatory framework for payment services. As such, the government has been working on tailored stablecoin legislation since the release of discussion papers in October 2023, with formal regulations not expected until 2025 at the earliest.
Clarifying Staking Services and Regulatory Uncertainty
Another area of focus is the regulation of staking services, a popular practice in the cryptocurrency world where users lock up their assets in a blockchain network to earn rewards. The crypto industry has been vocal in its preference for staking services not to be classified as “collective investment schemes,” as this designation would subject them to more stringent rules. Siddiq assured the summit that the government intends to eliminate this legal uncertainty, stating, “It doesn’t make sense for staking services to have this treatment.” This move is likely to be welcomed by crypto industry players who have long called for a more pragmatic and flexible regulatory approach.
The UK’s Crypto Ambitions: Lagging Behind Europe and the US
While the UK government has expressed its desire to become a global hub for cryptocurrency innovation, it has often been criticized for not keeping pace with other regions. Under the former Conservative administration, there was talk of positioning the UK as a leading crypto destination. However, the regulatory environment was seen as overly complex and inconsistent, particularly due to the role of the Financial Conduct Authority (FCA), which operates independently of the government. The FCA’s cautious stance and frequent delays in issuing clear guidance have left many in the crypto industry frustrated and seeking certainty elsewhere.
Meanwhile, Europe is moving forward with its own regulatory framework, with the European Union’s Markets in Crypto-Assets (MiCA) regulation set to come into full force by the end of 2024. MiCA aims to provide comprehensive oversight for the crypto industry, including clear guidelines for stablecoins, exchanges, and wallet providers. With Europe offering regulatory certainty and predictability, the UK risks falling behind if it doesn’t act swiftly.
At the same time, the United States is also expected to see a shift in its crypto regulatory landscape, with President-elect Donald Trump’s administration seen as likely to be more crypto-friendly. If these trends continue, the UK could find itself at a competitive disadvantage, as crypto businesses look to jurisdictions that offer clearer rules and more favorable regulatory environments.
The Labour Government’s First Moves on Crypto Regulation
The Labour government’s crypto regulatory efforts have so far been modest but pointed. In September 2024, it introduced a bill aimed at clarifying the legal status of non-fungible tokens (NFTs), cryptocurrencies, and carbon credits by officially recognizing them as property. This bill is seen as a first step toward a more comprehensive regulatory framework, signaling the government’s intention to bring greater legal clarity to the crypto space.
Despite these early efforts, much remains to be done to align the UK with global regulatory standards. With the European Union’s MiCA regulation set to go live soon and the U.S. potentially adopting a more crypto-friendly stance, the pressure is on for the UK to deliver a robust and forward-thinking regulatory approach that can attract crypto businesses and foster innovation.
The Need for Speed: Can the UK Keep Up with Global Competitors?
With the UK facing mounting competition from both Europe and the United States, the stakes for crypto regulation have never been higher. The Labour government’s pledge to deliver a draft regulatory framework by early 2025 is a step in the right direction, but the crypto industry will be watching closely to ensure that the regulations are both comprehensive and flexible enough to support innovation while protecting consumers.
As the global crypto landscape evolves rapidly, the UK will need to act quickly to ensure it remains an attractive destination for blockchain startups and established crypto players alike. For the UK to reclaim its position as a leader in the crypto space, it must prioritize clarity, consistency, and speed in its regulatory approach—ensuring that businesses can thrive in a secure and predictable environment. Only time will tell if the Labour government’s approach can deliver the regulatory framework needed to make the UK a true crypto hub once again.
