UK: HMT publishes draft Statutory Instrument on cryptoasset activities

What has happened?

Following the publication of HM Treasury’s (“HMT”) previous proposals in 2023 under the previous government, on Tuesday 29 April 2025 HMT unveiled the widely anticipated draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 (the “draft Order”). The draft Order sets out the first detailed explanation of how the regulatory perimeter will be expanded to include new regulated activities that relate specifically to cryptoassets.

The Order is accompanied by a Policy Note explaining the policy intention behind the draft Order (“Policy Note”). HMT is welcoming technical comments on the draft Order until 23 May 2025.

The draft Order does not include the admissions and disclosures, and market abuse frameworks – we can expect to see draft provisions for these “in due course”. Additionally, subsequent to the draft Order, the FCA (per its Roadmap) will also need to develop the finer details of the regime.

Key points of note

The draft Order is published for “technical checks” only—in other words, for feedback on significant oversights and where the drafting does not achieve the policy intention stated in the accompanying Policy Note, rather than substantive comments on the overarching policy approach. That said, industry now has the opportunity to feedback on the draft legislation and comment on areas that may benefit from further clarification or amendment.

The key points to note are as follows:

• New regulated activities and definitions

The draft Order introduces new regulated cryptoasset activities by making amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the “RAO”). In brief, the new activities include:

• stablecoin issuance;
• safeguarding (custody);
• staking;
• operating a trading platform;
• “dealing” in cryptoassets (as principal or as agent); and
• “arranging deals” in cryptoassets

The draft Order also sets out a number of new defined terms such as “qualifying stablecoins”, “qualifying cryptoasset trading platform” and “specified investment cryptoassets”.

Some of the new activities – such as those for staking and stablecoin issuance – are entirely new and do not have any parallels in the existing regime for regulated investments (such as securities and derivatives). Others, however, such as “dealing” and “arranging deals”, use the same language that is used for existing regulated activities. The new crypto-related regulated activities also have exclusions that have been identified specifically for them. It will be important to clarify how the new activities may be interpreted in the context of existing regulated activities and how the boundaries of the regime apply in practice.

The UK proposals would currently mean that there are substantive differences between the UK approach and other that in other jurisdictions such as the US and EU. (Please also see our article on recent developments in the US.) It remains to be seen whether this could give rise to problems in the cryptoasset space, where some of the key use cases are around cross-border settlement and remittance.

• Geographical scope

In relation to a number of the new regulated activities, authorisation requirements would be triggered where there are UK-based consumers, irrespective of where the relevant firm is based.

With respect to stablecoin issuance, on the face of it the stated policy intention is primarily to address issuers established in the United Kingdom.

In other situations (for example, when the activity is carried on with a non-consumer in the UK), there are still some question marks regarding the geographical scope of the new regime, which will hopefully be resolved during the consultation process. The draft language will need to be carefully considered (and the impact assessed) to ensure that the Order ultimately achieves the intended policy outcome.

• Expansion of financial promotions rules

In the UK, there are already restrictions in place relating to the issuing of financial promotions relating to cryptoassets. The draft Order makes consequential amendments to other instruments including the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529) (the “Financial Promotions Order”)), to make sure that wholly new regulated activities relating to cryptoassets (such as staking) are in scope of the financial promotions regime.

The draft Order will also remove the current exemption for cryptoasset businesses registered with the FCA under the Money Laundering Regulations 2017 (“MLRs”). Firms which are only registered under the MLRs will lose their ability to approve financial promotions relating to cryptoassets – but the new regime is such that most firms in that situation are likely to need to obtain FCA authorisation in any event.

• Transitional provisions

Part 6 of the draft Order sets out a number of transitional provisions for implementation of the new authorisation regime. This includes providing the FCA with powers to facilitate the orderly wind down of a firm’s remaining UK business over a maximum two-year period where that firm has failed to obtain the required authorisations within the required deadlines. 

• Decentralised finance (“DeFi”)

The draft Order does not directly address DeFi. The intended policy outcome is for “truly” decentralised activities to remain out of scope of the regulatory perimeter, but the FCA will determine on a case by case basis whether there is a “sufficiently controlling party or parties” that ought to be subject to authorisation requirements. Notably, this echoes the approach stated in Recital (22) of MiCA – but there continues to be uncertainty around what amounts to “sufficient control”. 

Additionally, there remains some ambiguity around the extent to which entities that provide interfaces for or integrate DeFi services (e.g. decentralised exchanges) – but not actually have control over the relevant DeFi activities – are brought in scope of the new regulatory framework.

• Stablecoins and Payments

Although a key use case for stablecoins is in making payments (e.g. from cross-border transfers to the purchase of other cryptoassets), for reasons mentioned in the Policy Note (and as confirmed in 2024) to do with relatively low adoption of stablecoins for payment purposes so far, the draft Order does not provide for the payments regime (under the Electronic Money Regulations 2011 (“EMRs”) and the Payments Services Regulations 2017) to apply to stablecoins used for payments. This means that—for now—stablecoins remain unregulated from a payments perspective. The draft Order also includes provisions designed to make clear that “qualifying stablecoins” are not e-money under the EMRs.

Authored by Christina Wu, and Dominic Hill.