The Chancellor of the Exchequer Rachel Reeves has on Tuesday announced the UK’s plan to tackle the thorny issue of cryptocurrency regulation.

The government announced draft legislation for the crypto sector, following “discussions in Washington between the Chancellor and the US Treasury Secretary, Scott Bessent, where they also discussed opportunities to support businesses to innovate on both sides of the Atlantic.”

Prior to Donald Trump, the United States financial regulator, the SEC, had adopted a tough regulatory approach to the sector. But that stance completely changed under the Trump administration.

Meanwhile the UK’s governor of the Bank of England (BOE), Andrew Bailey, has also been much more reserved about digital assets, and frequently expressed his reservations and warnings about crypto in previous years.

Proposed regulations

Indeed, Andrew Bailey in 2023 had also publicly questioned the UK’s decision to explore the development of a digital version of Pound Sterling.

Now Chancellor Rachel Reeves has unveiled draft legislation for the cryptocurrency industry, which touts greater collaboration with Trump’s America, as the UK seeks to regulate the volatile world of digital assets.

The UK government said that firms offering services for cryptoassets such as Bitcoin and Ethereum will be subject to “new, clear rules, boosting investor confidence and driving growth through the Plan for Change.”

The government noted that around 12 percent of UK adults now own or have owned crypto, up from just 4 percent in 2021.

“But too often, consumers have been left exposed to risky firms and scams,” the government stated.

“Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter – cracking down on bad actors while supporting legitimate innovation. Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection, and operational resilience – just like firms in traditional finance.”

US engagement

The Chancellor also revealed that the UK and US will use the upcoming UK – US Financial Regulatory Working Group to continue engagement to support the use and responsible growth of digital assets.

This follows discussions in Washington between the Chancellor and the US Treasury Secretary, Scott Bessent, where they also discussed opportunities to support businesses to innovate on both sides of the Atlantic.

This apparently includes looking at ideas for how we could allow for greater collaboration on digital securities between the UK and US, including the proposals put forward by SEC Commissioner Hester Peirce for a transatlantic sandbox for digital securities.

“Through our Plan for Change, we are making Britain the best place in the world to innovate – and the safest place for consumers. Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the UK,” said Rachel Reeves, Chancellor of the Exchequer.

The Chancellor also announced that the government will publish the first-ever Financial Services Growth and Competitiveness Strategy on 15 July, alongside her Mansion House speech.

This will support the financial services sector’s long term growth, with Fintech identified as a priority sector, and help it finance investment and growth across the UK, the government claimed.

The government will bring forward final cryptoasset legislation at the earliest opportunity, following engagement on the draft provisions with industry.

Long time coming

The UK has been plotting how best to regulate the crypto sector for a while now.

The UK had launched a consultation on crypto regulation in early 2021 that was mostly focused on stablecoins.

Then in April 2021 the Bank of England set up a taskforce to look at the case for a new “Britcoin”, or central bank-backed digital currency.

In December 2022 it was reported that HM Treasury was finalising sweeping new powers for the Financial Conduct Authority (FCA) to properly regulate the cryptocurrency industry.

This included limits on foreign companies selling into the UK, provisions for how to deal with the collapse of companies, and restrictions on the advertising of products.

Then in November 2024 the FCA had warned that “crypto remains largely unregulated in the UK and high-risk, but also outlined its ‘roadmap’ for regulation of the sector and provided a timeline detailing key dates and milestones, with the regulatory regime expected to go live in 2026.