UK sets out new rules for crypto as it aligns with US on approach

By David Milliken and Tommy Reggiori Wilkes

LONDON (Reuters) -Britain will bring cryptocurrencies under compulsory regulation, finance minister Rachel Reeves said on Tuesday as the government signalled it would cooperate closely with the United States on the best approach towards digital assets.

The new draft laws will extend existing financial regulation to companies involved in crypto, aligning Britain with the U.S., rather than the European Union which has built rules tailored to the industry, experts said.

Britain's first set of draft rules for the sector comes as U.S. President Donald Trump has embraced crypto and vowed to roll back regulatory curbs on the industry, worrying critics. Euro zone finance ministers said last month they were concerned the U.S. embrace could affect euro zone monetary sovereignty and financial stability.

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.

"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 government's draft rules said stablecoin issuers would be subject to regulation, but only if the issuers are based in the UK.

The finance ministry said it aimed to finalise the new legislation 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.

"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 to come as regulators developed rules for regulated firms.

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, the culmination of a consultation process that began in November 2024.

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; Editing by William James, Hugh Lawson, Jan Harvey and Daniel Wallis)