A lot of chatter yesterday on this announcement – and not all of it helpful.
TLDR: The statutory instrument (or "SI") published yesterday is the latest iteration of the revisions to the Financial Services and Markets Act 2000 (“FSMA”) (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, which have been in the pipeline for quite some time now.
bitcoinpolicyuk (nprofile…6m0z) first provided evidence as part of this review of the future financial services regime in 2023 (see link in thread).
In England and Wales, Parliament will ordinarily define what financial activities are regulated, and then separate and independent regulators (such as the FCA) will apply the relevant regulation to these activities. Most of this SI deals with what kinds of activities are to be regulated, and which firms or companies will require authorisation to undertake those activities.
The SI does NOT in any way, shape or form regulate or affect the rules or operations of Bitcoin one iota, and anyone telling you that this draft legislation will ‘regulate Bitcoin’ does not understand the protocol or the system at all.
❓Key takeaways?❓
▶️“Cryptoassets” are already defined in FSMA (as amended by the Financial Services and Markets Act 2023) as being “any cryptographically secured digital representation of value or contractual rights that— (a) can be transferred, stored or traded electronically, and (b) that uses technology supporting the recording or storage of data (which may include distributed ledger technology).” This definition is extremely broad, but as a legal concept it is a relatively fair way to describe both Bitcoin and other cryptoassets (though it inevitably falls short of the more esoteric and conceptual definitions that we as Bitcoiners might include). Broad definitions tend to be favoured in drafting legislation of this type, so as to capture as much as possible in the definition.
▶️The SI adds some new definitions to FSMA, including concepts of ‘qualifying stablecoin’, tokenised e-money and tokenised deposits. None appear particularly relevant to Bitcoin.
▶️The bulk of the SI is a bit of a nothingburger for Bitcoin, though is more important for companies offering Bitcoin-adjacent services (such as exchanges). Unsurprisingly, such companies are likely to require authorisation as regulated entities, undertaking regulated activities. This is entirely unsurprising and in all honesty most firms are already/are in the process of becoming, authorised to perform such regulated activities.
▶️Firms already authorised for the new cryptoasset activities will not be required to additionally register as “cryptoasset exchange providers” or “custodian wallet providers” under the money laundering regulations, and they only need to notify the FCA. This change is to avoid unnecessary and duplicative compliance burdens, and is helpful as regards (hopefully) cutting down on the compliance burden here.
▶️The following section I found interesting, as the draft legislation actually contemplates stablecoins being used for payments. If stablecoins do serve as a gateway to Bitcoin, this is an intriguing development: “the government has said it will not proceed with amending the PSRs 2017 to bring UK-issued stablecoins into regulated payments at this time. This does not mean that stablecoins cannot be used for payments in the UK, but simply that they will remain unregulated for payments for the time being. The government considers that stablecoins have the potential to play a significant role in both wholesale and retail payments, and stands ready to respond to this as part of wider payments reforms as use-cases and user adoption develops over time.”
🤔What’s missing?🤔
▶️Nothing relating to whether a CGT exemption or de minimis threshold might apply for Bitcoin being used as a means of payment (but note that this is not a piece of fiscal or tax legislation; it relates to FSMA and to regulation of relevant activities).
▶️Recognition of Bitcoin as money, albeit not one issued by a nation state (though see the interesting quote above on payments with stablecoins, which could potentially lead to the inclusion of Bitcoin as one of these alternative means of payment).
▶️Addressing the definition of Bitcoin as a ‘restricted mass market investment’ by the FCA (but this is a matter for the FCA and not for this SI).
▶️Full details of any agreement or MOU between Reeves and the US Treasury Secretary. We know that there is a loose intention to work together here, so may be optimistic that the more enlightened attitudes to Bitcoin that we’ve seen from the US will rub off on us this side of the pond!
🚨Please do like and share – there has been a huge amount of misleading reaction to this circulated over the past 24 hours!🚨
