UK crypto companies are required to register with the Financial Conduct Authority and comply with strict anti-money laundering and counter-terrorist financing rules, a regulatory framework that industry figures say is undermining the country’s global competitiveness.
Under the current regime, firms must carry out detailed know-your-customer checks and report suspicious transactions, placing crypto businesses under similar obligations to traditional financial institutions.
Senior figures in the crypto sector argue that the UK’s regulatory approach has pushed innovation elsewhere. Bill Hughes, Senior Counsel and Director of Global Regulatory Matters at Consensys, previously said the UK has lost its position as a leading crypto hub to the United States, which he described as taking a more accommodating stance toward digital assets.
Hughes warned that treating all crypto activity as fully regulated financial instruments creates heavy compliance burdens and discourages firms from operating in the UK, weakening the country’s ability to compete internationally.
FCA Expands Focus on Stablecoins
Despite criticism of its broader crypto stance, the FCA is increasing efforts to support and regulate sterling-pegged stablecoins. In a recent letter to Prime Minister Keir Starmer, FCA Chief Executive Nikhil Rathi said the regulator will prioritise enabling UK-based companies to test stablecoin payment systems from 2026.
The initiative will build on a regulatory sandbox launched earlier this year, allowing firms to experiment with digital payment solutions under controlled conditions while regulators assess potential risks.
Balancing Innovation and Financial Crime Controls
The UK government continues to face pressure to strike a balance between preventing financial crime and fostering innovation in digital finance. While ministers have repeatedly stressed the importance of strong consumer protection and AML safeguards, industry leaders warn that excessive regulation risks pushing talent, capital and innovation overseas at a time when global competition in financial technology is intensifying.
