The United Kingdom has long been regarded as a global financial hub. Since the Big Bang deregulation of 1986 and the rise of Thatcherism, London has cultivated a finance-friendly environment that attracts international investment and trade. However, despite its prominent position in traditional finance, the UK’s approach to the cryptocurrency industry has been notably more cautious—at least until recently.
Over the past few years, the UK’s regulatory stance on crypto assets has shifted from skepticism and ambiguity toward gradual acceptance and structured oversight. Industry bodies such as CryptoUK have highlighted the lack of regulatory clarity and banking access as major hurdles. But recent developments signal that change is underway.
In this article, we explore the UK’s journey from regulatory hesitation to a more structured and open approach to cryptocurrency regulation.
The UK’s Initial Approach to Cryptocurrency
The UK has not introduced specific legislation targeting cryptocurrencies. Instead, it has applied existing financial and tax regulations to crypto-related activities. Unlike some jurisdictions that imposed outright bans on certain tokens, the UK opted for a tolerant—if uncertain—stance.
The Bank of England, for example, stated in early 2018 that cryptocurrencies did not pose a substantial risk to financial stability. This calm assessment helped avoid reactionary policies and allowed the market room to develop.
At the same time, Her Majesty’s Revenue and Customs (HMRC) clarified tax obligations for crypto users and businesses. Companies involved in crypto transactions are subject to corporation tax, while individuals are liable for capital gains tax on profits exceeding £12,000. Even VAT applies when goods or services are sold in exchange for cryptocurrency.
Challenges and Regulatory Gaps
Despite this accommodating baseline, the absence of tailored regulation created practical challenges. A significant issue was limited access to banking services. Many UK-based crypto businesses struggled to open corporate bank accounts, largely because most were unlicensed under the existing framework.
A survey conducted by CryptoUK revealed that 73% of crypto firms had to open bank accounts outside the UK due to these banking barriers. Over half of applications were rejected, often without explanation.
This banking gap underscored a broader need for regulatory certainty. Without clear rules, crypto companies lacked the legitimacy required to integrate into the traditional financial ecosystem.
Recent Regulatory Developments
A turning point came in July 2019, when the Financial Conduct Authority (FCA) published updated guidance on crypto assets. The document clarified how different types of tokens would be treated under current regulations:
- Exchange tokens like Bitcoin and Ethereum are not considered regulated assets.
- Security tokens fall under existing securities regulations.
- Utility tokens may be regulated depending on their structure and use.
The FCA also introduced the concept of “electronic money tokens,” bringing some tokens under the Electronic Money Regulations.
This classification was welcomed by industry participants who had long called for clearer definitions. It represented a collaborative step forward, incorporating feedback from crypto businesses.
Industry Response and Ongoing Concerns
Industry group CryptoUK acknowledged the FCA’s updated guidance as a move in the right direction. However, they emphasized that more comprehensive regulation is still needed to support growth and innovation.
Oleksandr Lutskevych, CEO of CEX.IO, noted that while security and e-money tokens now operate under clearer rules, other areas—such as initial coin offerings (ICOs)—still lack appropriate frameworks. Applying crowdfunding regulations to ICOs, for example, may not be suitable.
The overall sentiment is that the FCA’s guidance is a positive starting point, but not a complete solution.
Upcoming Regulatory Changes
Further changes are on the horizon. The UK is set to implement the EU’s Fifth Anti-Money Laundering Directive (5AMLD)—even after Brexit. Starting in January 2020, cryptocurrency exchanges and wallet providers must register with the FCA and comply with enhanced due diligence and reporting requirements.
This step is expected to improve the banking situation for compliant crypto firms and enhance consumer protection.
Additionally, the UK government has announced several consultations on crypto regulation set to take place before the end of the year. These will help shape a more detailed regulatory framework, possibly through secondary legislation.
The Impact of Global Players Like Libra
The announcement of Facebook’s Libra project accelerated regulatory discussions worldwide—including in the UK. Such large-scale initiatives have underscored the need for proactive rather than reactive regulation.
As Iqbal Gandham of CryptoUK noted, the rise of global stablecoins and corporate crypto projects makes it essential for jurisdictions like the UK to establish clear rules that foster innovation while ensuring consumer safety.
Conclusion: A New Phase of Acceptance
The UK’s regulatory journey reflects a broader global trend: from caution and ambiguity toward structured acceptance. While there is still work to be done, the direction is clear. The UK is gradually building a regulatory environment that can support a safe and growing crypto industry.
For businesses and investors, these developments are a positive sign that the UK is committed to balancing innovation with oversight.
👉 Explore updated regulatory guidelines
Frequently Asked Questions
How are cryptocurrencies taxed in the UK?
Individuals are subject to capital gains tax on crypto profits exceeding £12,000 per year. Businesses involved in crypto transactions must report profits as part of their corporation tax obligations. VAT may also apply in cases where goods or services are sold for cryptocurrency.
Can crypto businesses easily access banking in the UK?
Currently, many crypto firms face difficulties opening UK bank accounts due to regulatory uncertainty. However, upcoming compliance frameworks and FCA registration are expected to improve banking access for legally compliant companies.
What was the significance of the FCA’s 2019 guidance?
The guidance helped classify different types of crypto tokens and clarify which existing regulations apply to each category. This reduced ambiguity for businesses and set the stage for more detailed regulation in the future.
How will Brexit affect cryptocurrency regulation in the UK?
The UK is expected to continue aligning with international standards, including EU-derived regulations such as 5AMLD. The long-term impact will depend on how UK-specific policies evolve post-Brexit.
Are ICOs legal in the UK?
There is no specific ICO legislation, but offerings may fall under existing securities, crowdfunding, or financial promotion laws. Businesses must ensure they comply with all applicable regulations.
What role did industry groups play in shaping UK crypto policy?
Organizations like CryptoUK actively engaged with regulators, providing feedback and recommendations. Their advocacy contributed to clearer token classifications and more pragmatic regulatory approaches.