UK Treasury Drafts New Rules to Regulate Crypto Markets

The UK government is working to introduce a new regulatory framework that will place crypto under rules similar to those governing other financial products, with the legislation expected to take effect in 2027.

Under plans being developed by the Treasury, companies operating in the crypto sector will be required to meet a defined set of requirements monitored by the Financial Conduct Authority.

Ministers say the reforms are intended to address gaps that have emerged as crypto has surged in popularity, both as an investment and as an alternative payment method. Unlike shares, bonds, and other conventional assets, crypto has largely sat outside the UK’s regulatory system. As a result, consumers have often lacked the protections that apply elsewhere in financial markets.

According to the government, the planned rules are designed to improve transparency within the industry, strengthen trust among users, and provide authorities with better tools to detect criminal behavior, enforce penalties, and pursue wrongdoing.

The Chancellor, Rachel Reeves, noted that bringing digital assets within formal regulation is essential for maintaining the UK’s role as a leading global financial hub in an increasingly digital economy.

At present, crypto-related businesses such as exchanges and digital wallet providers must register with the FCA if they fall under anti-money laundering laws. The Treasury’s proposals go further, placing a wider range of crypto services under direct FCA supervision and applying requirements similar to those faced by traditional financial companies, including rules on disclosure and conduct.

The push for tighter oversight follows a period of volatility in the crypto market, compounded by wider investor anxiety about a possible AI bubble. Concerns about fraud have also intensified. Banking sector figures published in October showed that losses from investment scams affecting UK consumers rose by 55% over the past year, with fake crypto schemes being the most common.

High-profile criminal cases have also drawn attention to the risks. In September, a Chinese national living in the UK was convicted in connection with a vast Bitcoin fraud. Zhimin Qian was found to have played a central role in a scheme in China between 2014 and 2017 that affected more than 128,000 victims.

Authorities later discovered that the proceeds had been converted into Bitcoin. A police raid on a Hampstead property in 2018 led to the seizure of devices containing around 61,000 Bitcoins, now valued at over $6 billion. The Metropolitan Police have described it as the largest single cryptocurrency seizure ever recorded.

Separately, ministers are considering a ban on political donations made using crypto, citing difficulties in verifying where such funds originate and who ultimately controls them. Reform UK became the first British political party to accept digital currency donations earlier this year. The party has said it applies additional checks to such payments.

As regulatory clarity comes to different major crypto markets around the world, entities like BitFuFu Inc. (NASDAQ: FUFU) are likely to see these developments as further acknowledgment by the authorities that cryptos are here to stay.

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