- How the UK Currently Regulates the Crypto Market
- Highlights of the Upcoming Legislation
- Growing Crypto Popularity Drives Regulatory Demand
A spokesperson for the Financial Conduct Authority (FCA) announced on Friday that the UK is moving to limit the use of credit cards for purchasing cryptocurrency and accessing crypto lending products. The move aims to strengthen consumer protections in an increasingly popular and volatile market.
This week, the Treasury confirmed that cryptocurrencies will soon be subject to mandatory regulation, with exchanges, brokers, and issuers expected to comply with existing financial rules.
How the UK Currently Regulates the Crypto Market
In April 2025, the UK Treasury released a draft bill on cryptoasset regulation, the result of several years of consultations with industry players and the public. The bill is designed to introduce clear, transparent rules for all participants in the crypto space, from exchanges and stablecoin issuers to custody services and crypto lenders.
The FCA is currently seeking feedback on topics such as intermediaries, interest rates, lending, borrowing, and decentralized finance (DeFi), as outlined in a discussion paper published on May 2. Industry representatives argue that the regulator, which has overseen crypto businesses under anti-money laundering (AML) rules since 2020, has often taken an overly strict approach. Out of 368 applications in the past five years, only 51 companies have been registered. The consultation remains open until June 13, with the new licensing framework expected to roll out by 2026.
Highlights of the Upcoming Legislation
Expanding Regulated Activities
The bill proposes distinct licenses for activities such as running crypto exchanges, issuing stablecoins, and offering crypto custody and lending services, all falling under the FCA’s supervision.
Clear Definitions and Classifications
Precise definitions for terms like “qualifying cryptoassets” and “qualifying stablecoins” will help distinguish regulated digital assets from unregulated ones, setting separate standards for each.
Consumer Protection Measures
The new rules will introduce mandatory disclosure requirements, operational transparency standards, and measures to protect investors and prevent market manipulation. Crypto firms will be required to implement anti-money laundering procedures and ensure operational resilience.
Stablecoins and Staking
Particular attention is paid to stablecoins, with plans to regulate them outside of existing payment services rules, recognizing their unique role in the digital asset ecosystem. The legislation will also separately address staking services — a nod to current trends in the crypto industry.
Growing Crypto Popularity Drives Regulatory Demand
The FCA notes that crypto trading’s popularity has surged, with around 7 million people—roughly 12% of the UK adult population—now owning digital assets, though the sector remains largely unregulated. The regulator warns that consumers should be prepared to “lose all their money” if they invest.
As it introduces new legislation, the government says its goal is to crack down on “bad actors” while still supporting legitimate innovation in the fast-evolving crypto space. The FCA is also considering restrictions on retail investors using borrowed funds to buy crypto.
“We’re exploring a range of restrictions, including banning the use of credit cards for direct crypto purchases and limiting credit lines offered by electronic money firms for this purpose,” the regulator wrote in a document inviting feedback.
However, consumers would still be allowed to use borrowed funds to purchase stablecoins — digital currencies pegged to the value of assets like the US dollar, issued by FCA-regulated companies.
According to an FCA-commissioned survey, 14% of crypto investors used borrowed funds for purchases last year, up from 6% in 2022.
The FCA is also considering restrictions on crypto lending and borrowing, which could include credit checks and testing customers’ investment knowledge and experience. Crypto lending involves users lending out their digital assets in exchange for a return, while crypto borrowing lets customers take loans in cryptocurrency, repaying them with interest.
The regulator says crypto lending poses “significant harm risks,” including loss of asset ownership, liquidity issues, insufficient creditworthiness checks, and a lack of consumer understanding. Institutional investors, however, would still retain access to these services.
Finally, the FCA aims to improve transparency and public awareness around staking — the practice of locking up digital tokens in a blockchain network in exchange for rewards. A recent FCA-commissioned survey found that 27% of UK adults who own crypto have engaged in staking.
Hannah Meakin, a partner at law firm Norton Rose Fulbright, noted that the FCA is trying to strike a balance between innovation and proper oversight. “It’s no easy task, and time will tell whether they can get that balance right,” she said.
