TL;DR:
- The UK plans by 2027 to regulate crypto like traditional financial products, extending strict oversight that many now view as suffocating red tape.
- Bill Hughes warns that the UK’s choice to treat crypto as financial instruments, on top of FCA AML rules, hampers competitiveness against the US.
- The 2026 sterling stablecoin sandbox and 2027 deadline together sketch a future where crypto survives in the UK only as contained, supervised risk.
The UK government has confirmed a new deadline for its crypto crackdown, pledging to regulate digital assets under the same regime as traditional financial products by 2027. Behind the upbeat language about clarity and consumer protection, the plan effectively signals that crypto will be folded into the full machinery of traditional financial regulation, raising fears that an already burdened sector faces another wave of red tape disguised as modernisation, deepening concerns across builders and investors alike.
FCA rulebook extends its reach into crypto
According to the Treasury, the upcoming legislation will place crypto assets under standards enforced by the Financial Conduct Authority, with regulators aiming to boost transparency, track suspicious activity, tighten sanctions enforcement and hold firms directly accountable. Yet every new reporting duty or monitoring requirement pushes the industry closer to bank like surveillance, and critics worry that innovation will be treated as a compliance exception rather than the norm.
The push follows the Property (Digital Assets etc.) Act 2025 recognising digital assets as property, and now pairs that step with a blueprint that treats crypto as another product line under legacy finance rules. The UK already forces crypto firms to register with the FCA under anti money laundering and counter terrorist financing rules, including know your customer checks and suspicious transaction reports, so adding a financial products regime on top looks like escalation not refinement.
For some industry voices, claims that this agenda will boost competitiveness ring hollow, as legal experts argue that the UK’s heavy handed stance has cost it ground to the US, which has taken a friendlier approach to digital assets. Bill Hughes warns that the UK’s choice to treat crypto as financial instruments, on top of FCA AML rules, hampers competitiveness against the US, turning the Treasury’s promise of high skilled jobs into a relocation program for talent and capital.
Regulators are tightening rules on stablecoins, with the FCA telling Prime Minister Keir Starmer it will prioritise letting firms test sterling pegged payments in 2026 using a regulatory sandbox, effectively confining experimentation to a supervised sandbox rather than the open environment where crypto grew. Taken together, the 2027 target, the FCA perimeter and the sandbox pilot sketch a future where crypto survives in the UK, but only as contained risk rather than an open ecosystem.
