My wife was born in the United Kingdom and we’ve spent a lot of time visiting so I pay close attention to the country’s evolving stance on crypto. Now, with the UK’s draft Statutory Instrument on crypto regulation officially released, the country is positioning itself to finally act on its ambition to become a global “crypto hub.”
While the headlines might sound promising, the details, and the execution, will ultimately determine whether this marks a real turning point or another missed opportunity.
The United Kingdom’s cryptocurrency sector has long called for clearer, fairer regulations, and the new draft rules are being described by some as a strong step in the right direction. However, the work is far from finished. As Gemini’s Head of UK Legal Azariah Nukajam explains, the proposals must still undergo parliamentary scrutiny and are subject to feedback from across the industry.
In other words, the foundation is there, but the house hasn’t been built yet.
From stablecoins and staking to exchange registration and operational resilience, the scope of the draft SI is extensive. It reflects an intent to align cryptocurrency oversight with traditional finance standards, but the challenge lies in doing so without stifling innovation or pricing out smaller players.
As Nukajam notes, the UK’s framework stands apart from that of the EU and US in key areas, particularly by explicitly regulating staking and deliberately excluding decentralized finance from its scope for now.
In the Q&A below, I spoke with Azariah Nukajam about what this all means for exchanges, startups, and everyday crypto users in the UK. We covered everything from the UK’s position in the global regulatory race to how the FCA will handle the wave of expected applications.
crypto.news: My wife was born in England and we’ve visited often, so I have a personal interest in the UK’s crypto future. With the government’s new draft Statutory Instrument on crypto regulation now released, do you believe these rules will truly help the UK become the global “crypto hub” that officials envision, or are there reasons to be skeptical about how much of a game-changer this will be?
AN: The proposed rules have the potential to make the UK a globally competitive environment for cryptoassets, but its effectiveness will depend on how the final rules are implemented, and the pace at which the Government executes it.
This Draft SI sets the stage for full integration of cryptoasset activities into the broader financial regulatory framework, bringing much needed clarity and assurance for the sector. Nevertheless, the rules are still in draft form, meaning that they will be subject to further parliamentary scrutiny. In addition, the FCA has opened up a sector-wide debate under Discussion Paper DP25/1 Regulating Cryptoasset Activities. Therefore, there will be a real opportunity for the industry to give feedback to shape the final rules.
We’re still in the process of fully assessing the Draft SI as it was only very recently published, but we are generally supportive of proposed rules that provide a clear framework for cryptoasset activities (including stablecoin issuance, custody of cryptoassets, staking), and welcome this much needed regulatory clarity which has previously been of concern for firms operating in the sector.
The Draft SI provides that cryptoasset trading platforms will need to be authorised as qualifying cryptoasset trading platforms ‘CATPs’, which suggests that the FCA would allow firms to operate through branches. This is a positive step in maintaining global connectivity for liquidity pools across various regions and markets.
We’ve also seen the introduction of stricter rules for trading venues, which mirror the traditional finance rules, seeking to increase orderliness to the markets and enhance consumer protections.
However, in order for the UK to emerge as a “crypto hub”, it must get the fundamentals right, including the need for robust financial infrastructure, international connectivity, a stable economic and political environment, and a strong regulatory framework.
It’s important that the government does not broadly apply traditional financial principles without taking into account the unique characteristics of the crypto sector, such as applying traditional consumer credit rules to retail lending and borrowing, which don’t fully take into account the collateralised nature of cryptoasset loans.
There also remain some concerns around the potential impact of complex regulatory capital and operational requirements on smaller players within the sector. At this stage, we’re not aware of any proposals for a lighter-touch regime for certain types of business models, but see the potential advantages in encouraging innovation and competition by reducing compliance costs and regulatory burden.
CN: Industry observers have called this draft framework a strong step, yet caution that the UK is “still playing catch-up in the global race for regulatory leadership”. You yourself have mentioned the UK could use a “second-mover advantage” after the EU’s MiCA and the incoming pro-crypto US administration. How confident are you that the UK can catch up to and even leapfrog other jurisdictions? If the rollout isn’t swift and clear, do you worry London could still lag behind places like the EU, Singapore, or the US despite this head start?
AN: Slow implementation could undermine the UK’s competitiveness. If the UK delays implementation or overcomplicates compliance processes, it may lose ground to quicker-moving jurisdictions like Dubai, the EU, Singapore, or Switzerland.
Conversely however, the UK’s regime is distinct from that of the EU and US, and offers its own unique advantages, which in my view, will keep the UK ahead in the global leadership race. There are some areas in which the UK is showing its strengths; for example, the UK is one of the first jurisdictions to introduce a regulatory framework for cryptoasset lending and borrowing, as well as staking.
Broadly speaking, the regulatory position of staking activities across the globe, including MiCA remains unclear, whilst the UK’s Draft SI explicitly includes staking as a regulated activity under the term “qualifying cryptoasset staking”. This means firms involved in staking, including those offering staking services, validator pools, and loan desks that rehypothecate staked coins, will fall within the FCA’s regulatory framework. We can expect this level of certainty to attract firms that offer staking products and services to the UK markets.
Another potential advantage proposed by the UK’s regime is the exclusion of decentralised finance activities, which the government has indicated is a deliberate move to avoid stifling innovation.
CN: The UK government has signaled it will coordinate closely with Washington on crypto regulation, and observers note Britain’s rules “align… with the U.S., rather than the EU”. How do you see this UK–US cooperation playing out at a time when London – Washington relations isn’t exactly at its highest levels.
AN: There are some similarities between the UK and US regimes, for example both jurisdictions have indicated that they will prioritise consumer protection through the introduction of increased transparency and disclosure requirements, as well as broader conduct standards. Both governments have also clearly stated their intention to regulate stablecoins, which accounts for a significant portion of the cryptocurrency market.
The UK Chancellor indicated that cryptoasset regulations were featured on the agenda of ongoing negotiations, leading to a trade agreement between the UK and US on 8th May 2025. This marks their commitment to ongoing cooperation to establish a sound and robust approach to regulating digital assets. Whilst the impact of these agreements remains to be seen, we noted a positive response by the markets at the time, with price movements showing an exit from correction territory into what appears to be a new bull cycle for the sector.
There is nonetheless scope for caution. The pace at which both jurisdictions move to establish their regulatory frameworks could present some challenges if deployment is delayed or the crypto agenda is subsequently deprioritised. This is because of the extremely fast pace in which the digital assets industry has and continues to evolve.
CN: Under the new regime, virtually any firm conducting key cryptoasset activities in the UK will need to obtain FCA authorization as a regulated entity. The FCA still has to spell out the application process and requirements in detail. What do you expect this process to look like? How heavy a lift will it be for a crypto company to become authorized in terms of preparing business plans, compliance manuals, meeting fit and proper tests, possibly holding regulatory capital, etc.
AN: We expect the process to closely mirror existing requirements for firms seeking to obtain UK MiFID licenses. We see similarities between the UK regulatory framework under MiFID and the proposed crypto regime, and therefore, whilst the details remain to be announced, we can sensibly posit that the authorisation process will present a significant lift for cryptoasset firms. For example, firms will need to meet stringent requirements for governance, capital adequacy, and to submit a regulatory business plan.
Many crypto firms, particularly the bigger players within the sector, will already be regulated beyond cryptoassets, for example, some are Authorised Electronic Money Institutions (‘EMIs’) and Payment Service Institutions (‘PSIs’). Others have MiFID licenses, and therefore, are likely to be familiar with the process and understand the FCA’s expectations and robust standards at the authorisation gateway.
For smaller players however, this will present a significant step up and they may need to seek extra support with preparation from the regulators and legal advisers to avoid application delays or rejections.
The Draft SI includes transitional provisions designed to give cryptoasset firms a short window to seek authorisation, after which all in-scope activity will require full FCA permission under Part 4A FSMA. It should be noted that existing firms registered under the current MLRs (Money Laundering Regulations) will have no automatic rights or advantages over those without registration; no grandfathering or fast-track has been introduced.
CN: Following up from the above, do you think the UK regulators (the FCA in particular) are equipped to handle what could be a flood of applications from crypto firms eager (or forced) to come into the regulated fold?
AN: Yes, we’ve seen a real commitment by the FCA to deploy additional resources to its Authorisations Department, and to streamline applications processes through enhancements to the FCA Connect portal. They’ve also set clear expectations of the standards expected at the gateway. The FCA has indicated that firms can expect additional support through for example, authorisation information sessions, and over time, we expect the FCA to publish guidance and feedback (as it did for MLRs-registered firms), on good and poor applications.
CN: With roughly 12% of British adults having owned crypto at some point, how do you think these everyday users will be affected once the new regime kicks in? Will the typical UK retail investor notice positive changes – for instance, more trust in exchanges, clearer information about what they’re buying, fewer fly-by-night operators – as a result of regulation? Or is it possible they’ll face some inconveniences, like certain overseas platforms withdrawing from the UK market (thus limiting choices) or more rigorous onboarding checks when they open an account?
AN: These rules are a hugely positive step for the UK industry, and we have already seen the positive impact that higher compliance standards can have in the UK in the form of Consumer Duty. Gemini previously made the decision to expand our scope of application of Consumer Duty to include our MLRs business, even though this was not a regulatory requirement, and have noticed a marked improvement in the overall quality of customer experience.
As part of this, we’ve focused greater resources on defining and segmenting our target markets, and continue to build and enhance our products and services offered around our customers, and not the other way around. This is what the FCA will expect in the new regime.
Ultimately, these rules are key in building trust in the sector, so retail users know that the firm they’re using is regulated. It also gives a level of protection so that consumers aren’t exposed to potential risks such as breaches of consumer protection laws, failure to deliver promised services, misleading or deceptive practices, and lack of redress when things go wrong.
It’s possible that the regime may be too stringent for some firms to operate, leading to the withdrawal of overseas firms from UK markets. However, it’s unlikely that this will limit consumer choice, with over 50 firms currently registered under the UK MLRs to offer an array of cryptoasset services.
A concern among many in the community is that complex regulation inevitably favors the big guys – established exchanges, large fintech firms – who have the legal teams and capital to meet the requirements. Meanwhile, smaller startups or community-driven projects might struggle. Do you think the UK’s new rules risk entrenching the existing crypto incumbents?
The clear advantage of the new regulations for the industry is that this regulatory maturity is likely to lead to grassroots talent being developed within the industry, as well as others from TradFi crossing over, bringing transferrable skills. This should equate to opportunities for all sized participants. Under the Conservative Sunak government, the National Quantum Strategy was created to invest in and develop quantum technologies over the next 10 years. This seems to be supported by Starmer’s Labour government, with an injection of £121m in April 2025.
CN: The draft rules would impose traditional financial controls on crypto firms – we’re talking market abuse surveillance, stringent operational resilience planning, audited financial reports, etc. Where do you foresee the biggest challenges in applying these TradFi-style requirements to the crypto world? For instance, how do we monitor and prevent market manipulation in a 24/7 global crypto market with many anonymous actors?
AN: We can expect a marked increase in the cost of compliance for cryptoasset firms driven by the increasing regulatory requirements, and the need for specialised staff and technology to comply with complex areas of the regime such as market surveillance and operational resilience. This environment will benefit companies such as Gemini that have built proper controls in from the start and routinely prioritise security and compliance.
To comply with the new rules in a 24/7 crypto market, companies should invest in automated trade surveillance tools that are capable of ongoing monitoring for suspicious patterns such as spoofing and insider trading. In addition, to address anti-money laundering and sanctions risks, companies could utilise solutions such as blockchain monitoring to help detect potential anomalies in real time.
CN: How can a crypto exchange or custodian prove “operational resilience” against things like smart contract bugs or network attacks, which are new kinds of threats?
AN: Operational resilience is a high priority on the regulatory agenda, both from an FCA perspective and other regimes across Europe and the US. The regulators continue to highlight the need for scenario planning and stress testing in relation to cyber and technical failures, emphasise the importance of third-party/vendor risk management, and the need for firms to assess dependencies on cloud services or off-chain data sources.
Firms should be prepared to make significant investments to ensure that their operational infrastructure remains robust, through a multi-layered strategy that includes technical, governance, and regulatory components to manage cyber attacks and smart contract vulnerabilities. Similarly, cyber security measures should focus on prevention, detection and response, recovery, and continuity. For cryptoasset exchanges, due diligence is essential to manage smart contract risks.
This has always been a key priority for Gemini, having built a leading security program focused on developing innovative security solutions to help protect and secure our customers and their assets. We’ve also invested considerable resources to remain transparent about our security posture through third-party security assessments, ISO 27001 certification, and annual penetration testing.
In 2019, Gemini also engaged with Deloitte to become the world’s first cryptocurrency exchange and custodian to successfully complete its SOC 2 Type 1 examination. Measures such as this help to build trust with consumers and prove our global reputation for upholding the highest levels of security and regulatory compliance.
