United Kingdom

FCA — Crypto registration (MLR 2017), financial promotions, AML supervision — ~85% rejection rate

The Bank of England/PRA has reconsidered its initially proposed strict stablecoin regime and is now developing a softer approach to systemic stablecoin regulation, prudential standards for banks' crypto exposure remain under active development with international coordination, and the Bank is modernising financial market infrastructure including DLT-compatible 24/7 payments.

HM Treasury — Policy and legislation — phased crypto framework under FSMA 2023

**Exchanges**: Full registration/authorization for cryptoasset exchanges (fiat-to-crypto, crypto-to-crypto), trading platforms, brokerage/OTC services.[1][3][5]

**Custody providers**: Separate FCA custody license if holding client cryptoassets for 24 hours or more (the "24-hour rule"), including wallet services or temporary holdings during transactions; applies to UK-based and international firms serving UK customers.[2][1][3]

**Payment processors**: Crypto payment processing requires FCA registration/authorization; money transmission falls under Payment Services Regulations 2017 (PSRs) with FCA supervision for AML.[1][8]

**Current (as of 2026)**: Crypto exchanges and custodians must register with FCA under Money Laundering Regulations (MLRs) for AML/CTF compliance (mandatory since 2020); this covers exchange/custody but not full activities.[3][4][7]

**New FSMA regime (effective post-2026 applications)**: Shifts to full FCA authorization as a "regulated activity" under FSMA 2000; MLR registration does not automatically convert—firms submit new applications. Authorized firms comply with AML via license, no separate MLR needed.[3][4][5][6]

Jurisdictional scope: Physical UK presence (e.g., office, ATM) triggers requirements; serving UK customers may apply case-by-case.[5][7]

**Capital**: No fixed minimum, but proof of financial stability required.[1]

**AML/KYC**: Robust policies, KYC, transaction monitoring, sanctions screening, MLRO appointment; ongoing supervision.[1][3][7][8]

**Local presence**: UK-incorporated entity (or branch/subsidiary for foreign firms); appropriate UK office/resources; qualified directors, compliance officers.[1][4]

Other: FCA assesses beneficial owners/senior management; security measures, consumer protection.[1][2][4]

Incorporate/register as UK entity if needed.[1]

For MLR (current): Submit to FCA with AML policies; process takes time.[3]

For FSMA authorization (new regime): Applications open 30 September 2026 to 28 February 2027; demonstrate compliance with FCA rules, threshold conditions (e.g., resources, UK office).[4][6]

Fees vary by application; includes legal/compliance costs (e.g., AML checks, security).[4]

The FCA's regulatory regime for cryptoassets is still evolving through ongoing proposals and consultations, not a static finalized framework.

JMLSG AML guidance (crypto providers): https://www.jmlsg.org.uk/wp-content/uploads/2023/03/JMLSG-Part-II_Sector-22_March-2023.pdf[7]

**OFSI Enforcement**: UK VASPs must immediately freeze and restrict assets of designated persons (DPs), report holdings or suspected sanctions evasion to OFSI (e.g., via crypto transfers by DPs), and avoid processing transactions involving sanctioned parties; OFSI's 2022 Cryptoassets Threat Assessment highlights risks like pseudonymity enabling evasion. [1][4]

**OFAC/EU/UN Sanctions**: UK firms must comply with OFSI-implemented sanctions, which align with UN and EU lists but are UK-specific; primary sanctions bind all UK persons, while secondary sanctions (e.g., post-2022 Russia/Ukraine measures) restrict third-party dealings with sanctioned countries like Russia. No direct OFAC jurisdiction applies unless involving US nexus, but UK warnings echo US DOJ concerns on sanctions circumvention via crypto. [4][6][7]

**FCA Oversight**: Registered VASPs under the Financial Services and Markets Act (FSMA) must integrate sanctions screening into AML/CTF frameworks, with new rules from 2027 expanding custody definitions and requiring FCA approval by Feb 2028. [1][2][3]

Prohibited dealings with **prescribed countries** like Russia (post-2022 embargoes), North Korea, Iran, or Syria-linked entities; crypto transfers to/from these are high-risk and often blocked. [4][7]

No services to sanctioned jurisdictions or DPs globally; UK firms must block transactions even in unregulated markets if involving UK nexus. [7]

**Civil/Criminal Fines**: Unlimited fines, asset seizures, or imprisonment up to 7-10 years under Sanctions and Anti-Money Laundering Act 2018 and FSMA; OFSI can impose monetary penalties. [1][4][6]

**FCA Actions**: Fines, suspensions, or permanent closures for unregistered firms missing 2027-2028 deadlines; e.g., FCA clashes with Binance over compliance. [2][6]

Examples include sanctions on crypto networks (e.g., Prince Group-linked in 2023). [8]

**Financial Conduct Authority (FCA)**: Leads authorization, supervision, rule-making, and enforcement for cryptoasset firms and activities.[1][2][4][5]

**HM Treasury (HMT)**: Oversees policy development and legislation, including consultations on the regime.[5][6]