By David Milliken
LONDON (Reuters) -Britain plans to bring crypto exchanges and dealers under compulsory regulation for the first time under new draft laws announced by finance minister Rachel Reeves on Tuesday to regulate the crypto-asset industry.
“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,” the finance ministry said in a statement following Reeves’ announcement.
“Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection, and operational resilience,” it added.
Around 12% of British adults own or have owned cryptocurrencies such as bitcoin or ethereum, up from 4% in 2021, the government said.
Bank of England Governor Andrew Bailey has long warned of the risks to investors from bitcoin, which he does not view as a secure store of value like mainstream currencies.
However, he has seen more of a case to regulate so-called stablecoins, a type of digital currency that seeks to keep a fixed value relative to U.S. dollars or other assets.
The finance ministry said it aimed to finalise the new legislation for crypto assets by the end of the year. The rules build on initial proposals made in 2023.
Some critics have said regulating the sector could give a false sense of security to the public about the risks posed by digital securities that can have little or no underlying value.
However, Nick Price, financial services and crypto specialist at law firm Osborne Clarke, called it a “simple and straightforward piece of legislation” that would bring a great deal of certainty and stability and consumer protection.
“Whether it promotes growth and competition remains to be seen,” he said.
“The move explicitly aligns the UK with the U.S. approach of ‘crypto as securities’ – and represents a divergence with the EU’s more tailored approach to crypto under the MiCAR regime,” Price added, referring to EU rules that came into force in December.
Linklaters financial services lawyer Simon Treacy said the new rules defined the scope of the assets and activities that would be regulated, but a lot more detail was still to come as regulators developed rules for regulated firms.
Reeves said she had discussed crypto regulation with U.S. Treasury Secretary Scott Bessent during a visit to Washington last week, and that the two countries planned to discuss this further in June.
U.S. President Donald Trump has sought to embrace the industry and vowed to be a “crypto president”, challenging other jurisdictions that want to build their own digital currency sectors while protecting consumers and safeguarding financial stability.
Reeves also said she would set out broader plans for boosting the growth and competitiveness of Britain’s financial services industry on July 15 in her annual Mansion House speech in the heart of London’s finance district, the culmination of a consultation process which began in November 2024.
“Financial services is one of the key growth-driving sectors in the UK for modern industrial strategy,” Reeves said in a speech at the IFGS fintech conference in London.
In last year’s Mansion House speech, Reeves said British financial regulators had gone too far in squeezing out risk in the 15 years after the global financial crisis.
(Reporting by David Milliken; Additional reporting by Sinead Cruise and Tommy Reggiori Wilkes; Editing by William James, Hugh Lawson and Jan Harvey)
