The United Kingdom is developing a comprehensive post-Brexit cryptocurrency regulatory framework. The Financial Conduct Authority (FCA) oversees crypto asset firms, requiring registration for AML purposes. The UK government published plans in 2025 for stablecoin regulation and broader crypto asset frameworks. Crypto assets are recognized as property under English law. The regulatory approach aims to position the UK as a global crypto hub while ensuring robust consumer protection and financial stability. The government is actively working on legislation to bring crypto trading, lending, and staking under FCA oversight, with implementation expected in 2026.

Regulatory Authority: Financial Conduct Authority (FCA). Current Status: AML registration required; comprehensive framework in development. Stablecoins: Regulatory framework being finalized (2025-2026). Taxation: Capital gains tax applies; clear HMRC guidance available. Property Law: Crypto recognized as property under English law. Consumer Protection: FCA warnings and restrictions on high-risk products. Promotion Rules: Strict rules on crypto advertising (effective 2023). DeFi Regulation: Under consultation for future framework. Banking: Increasing bank participation with regulatory clarity. Timeline: Comprehensive framework expected 2026.

FEDERAL REGULATION

FCA Registration (Mandatory since January 2020)

• All cryptoasset service providers must register with Financial Conduct Authority (FCA) under Money Laundering Regulations (MLRs)
• Applies to: Cryptoasset exchange providers, custodian wallet providers
• Application via FCA Connect system
• Assessment timeline: 3 months once all information provided
• Firm Reference Number (FRN) issued upon approval

Registration Requirements

• Comprehensive understanding of UK AML/CTF regime
• Appoint Money Laundering Reporting Officer (MLRO)
• Complete business plan and risk assessments
• Security policies and procedures
• Source of funds documentation
• Pay registration fee (amount varies)

Key Guidance Documents

• Joint Money Laundering Steering Group (JMLSG) guidance
• FCA Financial Crime guide for firms
• FCA Guidance (FG17/6) on Politically Exposed Persons (PEPs)
• FATF Guidance on risk-based approach
• PS19/22: Guidance on Cryptoassets
• PS23/6: Financial promotion rules for cryptoassets

NEW REGULATORY FRAMEWORK (2026)

• Activity-based crypto regime proposed (December 2024)
• Stablecoin regulations being finalized for 2026
• Authorized firms with new permissions will no longer need separate AML registration
• Enhanced investor protection measures

Supervision

• Portfolio-based supervision (firms with common business models grouped)
• Dedicated oversight for high-impact firms operating globally
• Ongoing reporting and compliance obligations
• Regular compliance checks and audits

COSTS

• Registration fees vary by firm size and complexity
• Legal/compliance costs: £20,000-£100,000+ for initial application
• Ongoing compliance costs significant

CAPITAL GAINS TAX

Rates: 18% or 24% on gains above £3,000 tax-free allowance (2024-25). Taxable events: selling crypto, exchanging tokens, using for payments, gifting (except spouse/charity).

POOLING METHOD: HMRC requires average cost basis (NOT FIFO). Each purchase adds to pool, sales deduct proportionally. Exception: same-day and 30-day rules.

Example: Buy 100 tokens £2 each + 300 tokens £1 each = 400 tokens costing £500 (£1.25 average). Sell 200: cost basis £250.

Allowable Deductions: Transaction fees, advertising, contract costs, valuation costs, pooled costs proportion. Cannot deduct: Income Tax costs, mining equipment/electricity.

INCOME TAX

Rates: 20-45% progressive. Applies to: mining (business), staking rewards, employment payments, airdrops for services, DeFi yield farming.

RECORD KEEPING: Must keep for each token pool: type, disposal dates, numbers, GBP values, bank statements, pooled costs, wallet addresses. Exchange reports are NOT tax calculations.

REPORTING: Self Assessment (cryptoasset section from 2024-25, due Jan 31) or CGT Real Time Service (60 days). Cryptoasset Disclosure Service for earlier years.

PENALTIES: Failure to report up to 100% tax owed, deliberate concealment = criminal prosecution, late payment = interest.

DIGITAL/NEOBANKS (Most Crypto-Friendly)

Revolut: In-app crypto trading, FCA-registered exchange transfers, 30M+ users. Monzo: Crypto-friendly, FCA-registered exchanges accepted. Starling Bank: Smooth crypto processing, business accounts. Wirex: Crypto-native banking, debit cards, FCA e-money institution. Cashaa: Specialized crypto banking.

TRADITIONAL BANKS

Crypto-Friendly: Lloyds Banking Group, RBS Business (crypto company accounts), NatWest (FCA exchanges), Barclays (limited, case-by-case), Nationwide (debit only).

Avoid: HSBC (blocks crypto), Santander (restrictions), Metro Bank (restrictive).

BUSINESS BANKING

Challenges: Traditional banks reluctant, 3-6 month process, high minimums, enhanced due diligence. Specialized: Greengage, Xace, Bank Frick (Liechtenstein).

Requirements: FCA registration (greatly improves access), business plan, AML/KYC docs, source of funds, transaction monitoring acceptance.

RECENT DEVELOPMENTS (2024-2025)

FCA activity-based regime (Dec 2024), stablecoin regulations 2026, improved clarity helping relationships. Transfers only to FCA-registered exchanges (Coinbase, Kraken, Binance UK, eToro, Crypto.com).

ACCOUNT OPENING

Individuals: Choose crypto-friendly bank, standard KYC, explain activity, start small. Businesses: Get FCA registration first, 2-6 month process, comprehensive docs, consider specialized banks, use multiple for redundancy.

Alternatives: EMI providers, offshore buffers, crypto-native solutions (Wirex, Cashaa), European banks serving UK.

https://www.fca.org.uk/