The UK is preparing to regulate the cryptocurrency sector under the supervision of the Financial Conduct Authority. The government aims to introduce consumer protections that are currently missing in the industry, according to The Guardian. Officials said one goal of the legislation is to close this protection gap.

The FCA launched a public consultation to examine how existing handbook provisions would apply to crypto firms. The consultation covers governance, operational resilience, financial crime controls, and Consumer Duty obligations.

Companies would need FCA authorization before operating. Officials said this is intended to raise standards, strengthen consumer protection, and address risks, including volatility, as new legislation is drafted.

Rising Risks and Fraud

Crypto growth in the UK has coincided with rising fraud and investment losses. UK Finance data showed a 55% increase in funds lost to crypto-related scams over the past year. Last month, authorities carried out the country’s largest Bitcoin seizure.

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Chinese national Zhimin Qian, who defrauded more than 128,000 people in China, had hidden the proceeds in the UK. Authorities recovered 61,000 BTC, worth over £5 billion.

Goals of the New Rules

The rules are expected to increase market transparency, improve detection of suspicious activity, allow sanctions, and hold companies accountable. Officials said the measures could help position the UK as a hub for digital asset innovation.

“By giving firms clear rules of the road, we are providing the certainty they need to invest, innovate and create high-skilled jobs here in the UK, while giving millions strong consumer protections, and locking dodgy actors out of the UK market,” UK Chancellor Rachel Reeves said.

Support for "Growth"

City Minister Lucy Rigby said the legislation would support growth. “Bringing forward this legislation is a milestone. Our intention is to lead the world in digital asset adoption. The rules we are putting in place are going to be proportionate and fair. They are going to be good for growth, encourage firms to invest here and protect consumers as well,” she said.

Rigby is expected to table secondary legislation. Officials aim to have the final rulebook ready by mid-2026, with full implementation in 2027.

Faster Registration Process

The FCA has accelerated its registration process for crypto firms, reducing the average approval time from over a year to five months. Approval rates have increased to 45% in recent months, compared with less than 15% over the past five years.