Is crypto regulated in the UK?

As things stand cryptocurrencies or cryptoassets, as defined by lawmakers, are not regulated in the UK. Bitcoin and other cryptocurrencies are only regulated for money laundering purposes.

The UK’s financial watchdog, the FCA, introduced regulatory measures in 2020 that required all businesses in the sector to register on its temporary register for cryptoasset firms↗︎ so that they could assess and check that companies had effective anti-money laundering and terrorist financing procedures in place.

Last year some of the biggest cryptocurrency exchanges came under fire from the regulator which resulted in the FCA taking extreme action by banning Binance from operating in the UK after the exchange failed to adhere to regulatory requirements.

The ban automatically meant that all British banks had to immediately impose a ban on transfers from and to Binance, and some banks took the opportunity to take things further by completely banning customers from interacting with crypto exchanges.

As you can imagine, this went down like a lead balloon, in particular here in the UK where the large majority of crypto investors are Binance users.

As a result of the measures taken, FCA-registered rivals such as eToro↗︎, Revolut, Paypal and Uphold all benefited from the ban as users flocked to alternative platforms to avoid restrictions put in place by banks.

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Even though most bank restrictions remain in place, digital banks have made an effort to lift most curbs, making them more crypto-friendly compared to their high street counterparts.

In April 2022, the British government announced plans that would see stablecoins recognised as a valid form of payment.

In October 2022, lawmakers in the UK voted in favour of recognising cryptoassets as regulated financial instruments and products.

The long-awaited move, which will certainly pass through Parliament, will see Britain have the power to regulate cryptoassets.

The bill will give the Financial Conduct Authority full powers to regulate stablecoins only, but the amendment broadens the remit to cover promotions for all cryptoassets.

What are stablecoins?

Stablecoins are a form of cryptoasset that are typically pegged to a fiat currency such as the dollar or a commodity such as gold and are intended to maintain a stable value. With appropriate regulation, they could provide a more efficient means of payment and widen consumer choice.

Takeaway

As soon as the law is passed, the UK Treasury will be able to enforce regulation over the crypto market – but don’t expect this to happen soon, it will take a long time before the bill becomes law.

For now, if you are interested in investing in cryptocurrencies, it will be most beneficial if you start your journey with FCA-regulated firms to avoid all of the hoo-ha that comes with banks.