In early April, we published an article arguing that the UK needed to move quickly to regulate stablecoins, and advocating a number of legislative solutions to some real blockers to the industry's success.
At Innovate Finance Global Summit on 29 April, Chancellor Rachel Reeves personally announced draft legislation implementing HM Treasury's (HMT) stated policy of bringing cryptoassets (including stablecoins) into UK financial services regulation. The legislation was presented by her as "backing the builders" and "making Britain the best place in the world to innovate – and the safest place for consumers."
This was greeted with a predictable mixture of euphoria, scepticism, and outrage from various corners: euphoria from those who have been pleading with the government to accelerate the process, scepticism from those who continue to worry about "crypto", and outrage from those who appear to think the proposed regulatory framework is a stab in the back for the sector. (Much the same mixture has accompanied the progress through the House of Lords of the Property (Digital Assets etc) Bill, a topic on which we have also written more than once.)
Our view is that none of those knee-jerk reactions are entirely right. All those with an intention to use or invest in cryptoassets should carefully consider this draft legislation, which is open for "technical comments" until 23 May 2025. However (as is common in a legal field that is both novel and complex), there are aspects that are either quirky or outright negative.
This briefing unpacks the key questions raised by this legislation and highlights key issues that cryptoasset firms will need to consider.
The passage of this legislation will undoubtedly be a watershed moment, galvanising investment in and adoption of a technology that has the potential to transform financial markets, maintain the UK's position in the very top tier of jurisdictions for fintech, and ultimately spread benefits through the real economy.
Unlike the approach taken by the EU in its Markets in Crypto-Assets Regulation (MiCA), the UK is incorporating cryptoassets into its existing regulatory framework. That approach benefits from familiarity with elements of the existing regime.
Moreover, in certain areas, it is apparent that the UK is seeking to take advantage of its "second-mover" status, reacting in near real-time both to MiCA and to developments in the US, where a Senate vote on stablecoin legislation is now expected in weeks.
Some of those expressing the outrage described above should wait for the FCA's more detailed rules (which will surely follow swiftly on the heels of this legislation). That, along with draft legislation on admissions and disclosures, and market abuse, is the next key point at which to engage.
