US, UK digital asset regulation: Different roads, same destination

Exploring how two major financial hubs approach digital assets—the impact of enforcement-first vs innovation-first mindsets.​

• US vs UK digital asset regulation
• US stablecoin regulations
• Financial promotion
• UK’s slow regulation process
• Stablecoin is the top priority
• UK’s approach to regulation
• UK aligning with US
• Slow race to digital asset regulation

The blockchain sector is experiencing a boom period, with the stablecoin market climbing past a $300 billion market cap for the first time in October, just as BTC was reaching new heights of $126,000 per coin. With this in mind, it seems an appropriate time to examine how two of the world’s largest economies are approaching regulation of this fast-growing sector: the United States and the United Kingdom.

At the time of writing, the U.S. is the world’s largest economy by gross domestic product (GDP), and the U.K. is sixth. These global rankings are fairly consistent with the countries’ relative prominence in the digital asset sector. In September, blockchain analytics firm Chainalysis published its 2025 ‘global crypto adoption index,’ examining levels of digital asset adoption by populations around the world, finding that the U.S. was second in the overall rankings while the U.K. was tenth.

While traditional financial regulation in the U.S. and U.K. has had the benefit of being molded by over a century of careful evolution, often in response to major scandals and financial crashes, in contrast lawmakers in both countries have been playing catch-up trying to regulate a sector that’s evolved in less than 20 years from a fringe curiosity—the domain of crypto-anarchists and silk road shoppers—to a roughly $4.27 trillion industry.

Up to the beginning of this year, U.S. digital asset oversight—in the absence of any tailored legislation—largely consisted of a ‘regulation-by-enforcement’ approach, spearheaded by the former chairman of the Securities and Exchange Commission (SEC), Gary Gensler. Gensler saw the ‘crypto’ space as rife with fraud and abuse, a wild west, and he was the embattled lawman trying to rein in the outlaws.

However, Gensler stepped down in January, just as U.S. President Donald Trump took office, and subsequently, the latter crypto-advocate-in-chief heralded a far more supportive and digital asset-embracing environment. This has been achieved through a combination of key appointments, budget restraints, and executive orders. The latest chapter in crypto’s U.S. redemption story saw Trump add pardons to this list when he handed one to the founder of digital asset exchange Binance, Changpeng Zhao, who pleaded guilty to breaking U.S. anti-money laundering laws in 2023.

Announcing the pardon on October 23, White House press secretary Karoline Leavitt said that Trump had “exercised his constitutional authority by issuing a pardon for Mr. Zhao, who was prosecuted by the Biden Administration in their war on cryptocurrency.” She added that “the Biden Administration’s war on crypto is over.”

Meanwhile, over the pond, the U.K. has been going cross-eyed trying to monitor the progress of the European Union’s landmark digital asset regulation while simultaneously keeping one eye on fostering its ‘special relationship’ with the U.S. For this reason, it has taken a more cautious wait-and-see approach to digital asset regulation, introducing piecemeal rules related to financial promotions, banking, and property law.

The way some of these rules have been enforced by regulators, particularly the financial promotion regime, has jarred with the U.K. government’s vocal support for the digital asset sector, leading to a sense of impatience for more crypto-friendly regulation and rulemaking.

The U.K. government’s apparent fondness for the digital asset sector has undoubtedly been affected by the elephant in the room, a supposedly £50 billion ($66.9 billion) black hole in its budget. The idea of scaring away investment from an innovative sector that’s experiencing a boom period—thanks in part to U.S. policies under Trump—is not something the U.K. can necessarily afford to contemplate in its post-Brexit precarity.

In short, both the U.K. and U.S. digital asset markets, for one reason or another, have lived through a period of apparent regulatory clampdown, extended by delays in more friendly legislation.

Looking beyond this general similarity of circumstance, there appear to be a number of other specific areas where the two countries converge on approaches to digital asset regulation, as well as a few key areas of divergence.

With this in mind, let’s map in more detail the regulatory roads the two countries are going down, and see whether they lead to the same destination.

From enforcement to embrace in the US

The U.S. approach to digital asset regulation and oversight has been broadly defined by two main influences: first, the snail pace of the U.S. legislative process, often further delayed by partisan politics; and second, the changing political leadership of the country. The two factors often intersect, with the political leaning of the incumbent administration affecting what legislation has a chance of success.

Under President Joe Biden, the administration took a more hands-off approach, allowing the SEC to claim jurisdiction over all digital assets other than Bitcoin and possibly Ethereum. Its view was that they almost all qualify as securities based on the Howey test, which states that an asset is a security if: it is an investment of money, in a common enterprise, with an expectation of profit, based solely on the efforts of others.

This all-encompassing view, held and proclaimed frequently by Gensler, was combined with an equally strong belief among regulators that the digital asset area is rife with fraud and misconduct.

During the Biden era, the SEC and Gensler spearheaded a ‘regulation-by-enforcement’ approach to the sector, in which—absent any specific legislation mandating otherwise—the regulator vigorously enforced existing securities laws on digital asset firms and those dealing with them, much to the chagrin of industry participants and pro-innovation politicians alike.

Enter Trump, who has made no bones about his ambition to turn the U.S. into the “crypto capital of the world,” and who launched his memecoin $TRUMP two days before his January inauguration. Since then, he has installed crypto-friendly figures in key roles, including the appointment of Travis Hill as Federal Deposit Insurance Corporation (FDIC) acting head, Scott Bessent as Treasury Secretary, and Paul Atkins as the replacement to the outgoing Gensler.

Very uncoincidentally, the SEC has since reigned in its aggressive approach, dropping or settling a number of key cases, as well as stating that it no longer considers memecoins and certain stablecoins to be securities.

This sea-change of regulatory personnel and opinion has run parallel with heightened legislative efforts from Congress, which has already made more progress on major digital asset-specific regulation in the past year than in the whole of the Biden years. Specifically, the passage into law of significant stablecoin regulation, in the form of the GENIUS Act—more on this later.

Beyond stablecoins, there has also been some progress in legislation that would cover the sector as a whole. As things stand, the most likely digital asset market bill to succeed is the CLARITY Act, which was passed by the House of Representatives back in July with overwhelming backing—in a vote of 294-134, with 78 Democrats in favor.

The CLARITY Act would effectively solve the regulatory turf war between the SEC and its fellow finance sector watchdog, the Commodity Futures Trading Commission (CFTC), by handing the principal responsibility for regulating digital assets to the CFTC, with a lesser role for the SEC.

Under the bill, the CFTC would have primary regulatory responsibility over spot digital commodities, while the SEC would have jurisdiction over specific forms of digital assets, such as ‘permitted payment stablecoins,’ as defined under the GENIUS Act. The SEC would be given the authority to prevent fraud, manipulation, and insider trading in the stablecoin context, while the CFTC would retain authority over stablecoin transactions that occur on a CFTC-registered platform.

The bill also includes provisions that would exempt certain assets from being considered “investment contracts,” and thus regulated securities under the Howey test. Namely, digital assets originally sold under investment contracts would be protected from being deemed investment contracts by association, and secondary distributions of digital assets—the sale of the asset by someone who is not the issuer—would also be exempt from being deemed an investment contract.

Another change would be the creation of a new category of regulated entity called “Qualified Digital Asset Custodians”—entities that hold digital assets on behalf of persons or entities registered under the Act—which would fall under the CFTC’s purview.

The CLARITY Act currently sits with the Senate, awaiting debate and possible amendments. In its favor, it has bipartisan support and the House of Representative’s seal of approval, so the outlook is promising.

Nevertheless, until the bill or similar legislation is passed, there will remain some ambiguity in the U.S. over which assets are securities, and who needs to register what asset with whom.  There also remains the unofficial standing order—perhaps party line is more fitting—from the Trump administration, to support and embrace the digital asset space, not regulate it by enforcement.

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Financial promotion and indirect regulation

Watching all this unfold from afar, the U.K.’s equally sluggish approach to digital asset regulation has been accompanied by comparatively little drama.

In June 2023, the U.K. parliament passed the Financial Services and Markets Act (FSMA) 2023, which allowed for stablecoins and digital assets to be treated, for the first time, as regulated activities in the country.

The FSMA 2023 extended the banking rules of the previous FSMA iteration—such as maintaining adequate capital to withstand financial shocks, implementing robust risk management practices, and providing clear and transparent information to customers—to stablecoins and digital assets.

The FSMA also gave the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)—the country’s top finance sector and banking sector watchdogs, respectively—the necessary powers to begin rulemaking over certain, limited areas of the sector.

Under the current U.K. regulatory framework, there is less ambiguity over which assets fall under which regulator. This is partly because, unlike the U.S., the U.K. only has one top finance sector regulatory governing securities and commodities, and partly because the FCA has already set out which crypto-assets are subject to existing rules and regulations.

According to the FCA, digital assets fall into one of three categories: ‘Security tokens,’ which are regulated and akin to specified investments, such as shares, bonds and debt instruments; ‘E-money tokens’, which are tokens that meet the definition of e-money under the Electronic Money Regulations (EMRs); or ‘Unregulated Tokens’, which are “usually decentralised and designed to be used primarily as a medium of exchange.”

Security tokens and e-money tokens must comply with the relevant existing regulations that apply to their related asset class. However, decentralized stablecoins and cryptocurrencies do not fall within the FCA’s current definition of security tokens or e-money tokens, and as such, they remain unregulated in the U.K.

This leaves a substantial regulatory gap that encompasses most digital assets on the market. Filling this gap, for the time being, are a couple of notable changes that came with FSMA 2023 that do affect unregulated assets and those who deal in them.

First, and perhaps most significantly, the FSMA updated the ‘Financial Promotions Regime’—a regulation designed to govern how firms operating in the U.K. can advertise and market their products—to include digital asset activity.

Specifically, under the new regime, any promotion of digital asset products or services needs to attach a ‘clear warning’ and firms marketing digital assets to U.K. consumers must introduce a 24-hour cooling-off period for first-time investors.

It also instituted just four lawful routes firms could take to communicate digital asset promotions in the U.K.: the promotion could be communicated by an “authorized person,” as defined by the FCA; an unauthorized person could communicate a promotion that had been approved by an authorized person; the promotion could be communicated by a digital asset business registered with the FCA under the Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLRs); or the promotion could be communicated if it met the conditions of an exemption in the Financial Promotion Order.

Promotions not using one of these legal routes would be considered in breach of the new rules and thus “a criminal offence punishable by up to 2 years imprisonment, an unlimited fine, or both.”

The financial promotions regime was the most impactful change to come with the passage of the FSMA, and was not met with universal approval from certain sectors of the industry. For some, it acted as a form of ‘indirect regulation,’ disincentivizing firms from approving promotions for digital asset companies on the warning list, or those they believe (rightly or wrongly) may end up on the list, lest they also find themselves under suspicion.

With many digital asset firms unable to get promotions approved in the U.K., they were naturally at a competitive disadvantage in the market—forced out without the FCA actually having to force them out.

Outside of the financial promotions regime, cryptoasset businesses (exchanges, wallets, etc.) based in the U.K. are also required to register with the FCA under the MLRs, which comes with a range of obligations, including verifying customer identities, assessing risks, monitoring transactions, keeping records, and reporting suspicious activity.

This is essentially how the situation remains in the U.K. as far as digital asset rules and regulations go, but efforts are underway to bring a more substantial and clearly defined framework.

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UK’s slow legislative progress

2025 has also seen U.K. lawmakers up the pace on legislative and regulatory efforts.

In April, HM Treasury published a draft Statutory Instrument (SI) that aims to definitively bring certain cryptoasset activities under the FCA’s remit, thus giving the regulator authority to properly govern and rule-making on those activities. This includes issuing qualifying stablecoins, safeguarding qualifying cryptoassets and specified investment cryptoassets, operating a qualifying cryptoasset trading platform, intermediation, and staking.

Subsequently, in September, the FCA published a consultation on the proposed application of its rules to firms conducting these soon-to-be-regulated cryptoasset activities. This would include firms needing authorization to operate in the U.K., as well as imposing standards expected of all other FCA-regulated entities.

According to the FCA’s ‘crypto roadmap,’ it expects to publish its final rules in 2026, with its new regime to go live sometime after.

On the one hand, this could be seen as positive progress, and yet the more cynical could argue that the U.K. is still doing lots of consulting and very little lawmaking, leaving digital assets largely unregulated in the meantime.

While U.K. lawmakers and regulators could point to a lack of market structure legislation in the U.S. as evidence that they’re no slower than their economic idol, they can make no such claims when it comes to stablecoin legislation.

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Stablecoins a priority

On June 17, the U.S. Senate voted 68-30 in favor of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, and a month later, the bill was signed into law by Trump.

Amongst its mandates are strict reserve, liquidity, capital, and risk-management requirements, including that issuers must maintain reserves on at least a one-to-one basis with the value of outstanding stablecoins and transparency in reserve composition. It also imposes anti-money-laundering (AML), sanctions, and reporting obligations on issuers and custodians, with the former subject to the Bank Secrecy Act and required to certify that they have implemented AML and sanctions compliance programs.

In addition, major issuers with more than $50 billion in stablecoins outstanding—such as Circle and Tether—are required to submit audited annual financial statements.

When it eventually comes into force, this tailored legislation should provide a mix of consumer and market protections while supporting the U.S. stablecoin space to grow. Ticking both these boxes is likely how it managed to get enough bipartisan support to escape the never-ending labyrinth of party politics that so often defines the U.S. regulatory process, leading to bills being frequently delayed or even abandoned.

The Act will take effect either 18 months post-enactment (January 18, 2027) or 120 days after the date on which the federal banking regulators issue implementing regulations, whichever is sooner. However, the restrictions on who can offer and sell payment stablecoins in the U.S. won’t apply until July 18, 2028.

This delay, between passage and implementation, may give the U.K. a bit of time to catch up with its own stablecoin rules.

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Mooted UK rules

Due to the differences in its parliamentary process, the U.K. does not suffer the same kind of partisan deadlock that often hampers U.S. legislation. It does, however, suffer from an equally laborious number of legislative hoops that must be jumped through along the way, delaying the passage of bills.

This has led the country to fall behind both the EU—whose stablecoin rules came into force in July of last year, as the first part of the Markets in Crypto Asset Regulation (MiCA)—and now the U.S. as well.

On May 28, the FCA published two consultation papers, one on ‘stablecoin issuance and cryptoasset custody,’ and the other on ‘a prudential regime for cryptoasset firms.’ In its consultation paper on stablecoin issuance and cryptoasset custody, the regulator laid out its plan to ensure regulated stablecoins maintain their value and that customers are provided with clear information on how the backing assets are managed. 

For example, on reserves, it recommended that stablecoin issuers appoint independent third-party custodians to hold reserve assets and proposed a minimum on-demand deposit requirement—money deposited in a bank account that can be withdrawn at any time without advance notice—of 5%, to avoid over-reliance on immediate access to the markets.

Under the proposed rules, stablecoin issuers would also be banned from paying holders interest—a similar mandate exists in the GENIUS Act—and are required to keep the assets segregated in a statutory trust. In addition, any stablecoin holder can request direct redemption of any amount, which should be actioned by the end of the following working day.

The FCA also proposed a permanent minimum capital requirement for issuers of qualifying stablecoins, to be set at £350,000 (around $471,500).

Importantly, under the new regime, stablecoin issuers and cryptoasset custodians would need to be authorized by the FCA and, once authorized, would continue to be subject to ongoing FCA supervision.

The deadline for feedback on the consultations was July 31, 2025. The FCA is currently considering feedback and said it aims to publish the final rules in 2026, along with its cryptoasset rules.

However, the regulator cannot enforce its rules until the necessary legislation, which would officially give it authority over the area, is put in place—the statutory instrument (SI) published by the Treasury in April. Unfortunately, as noted, this is still in draft form, without any clear indication of when it will be passed and grounded in statute. This leaves the U.K. stablecoin market in limbo, where it is kept company by the rest of the U.K. cryptoasset sector, until legislation passes.

Nevertheless, two things do appear clear: that the U.K.’s intended stablecoin rules will follow along similar lines to those of the U.S. and the EU before it; and that—legislative delays aside—the U.K. government shares Trump’s vision of crypto-utopia.

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UK aligns with US

In April, Chancellor of the Exchequer Rachel Reeves backed this vision when she emphasized that “the government remains committed to making the U.K. a global hub for digital asset technologies,” whilst indicating that the U.K. intended to further align its approach with that of the U.S.

The comments came after Reeves met with U.S. Treasury Secretary Scott Bessent in Washington, D.C., where, according to reports, they discussed collaboration around digital assets regulation.

“Through our Plan for Change, we are making Britain the best place in the world to innovate—and the safest place for consumers,” said Reeves. “Robust rules around crypto will boost investor confidence, support the growth of Fintech and protect people across the U.K.”

The Chancellor also said that the U.K. and U.S. would use an upcoming joint ‘Financial Regulatory Working Group’ to “continue engagement to support the use and responsible growth of digital assets.”

At the same time, HM Treasury said it would be looking at how it could allow for greater collaboration on digital securities between the U.K. and the U.S., including a proposal put forward by SEC Commissioner Hester Peirce for a transatlantic sandbox for digital securities. 

This all demonstrates that the U.K. is willing to practice what it preaches when it comes to backing the U.S.’s play and supporting the digital asset space, which should give some market participants hope that lawmakers can get the necessary legislation over the line soon, so the FCA can implement its plans.

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Snail race

Comparing the regulatory approaches of these two major economic jurisdictions (one admittedly more major than the other), the picture that emerges is of two different but equally dilly-dallying journeys to the same destination: substantive and innovation-supportive legislative.

The U.S. has been hampered by partisan politics and a radical change of administration redefining how it wants the digital asset sector treated; while the U.K., which has also lived through a recent change of administration, has been contrastingly consistent in its desire to foster a digital asset hub. Thus, the latter’s delay appears more of a tactic than a symptom of dysfunction, a desire to see how things pan out in other jurisdictions before acting.

Whatever the reasons, the result of these delays to legislation has been the same: that the countries’ respective finance sector regulators—the SEC, CFTC, and FCA—have been left to pick up the slack and largely make do with the existing regulations they have to work with.

In the case of the U.S., for a long time, this meant attempting to enforce securities regulation on the digital asset sector, whilst battling accusations that it was forcing a square peg into a round hole. But in the post-Gensler SEC, under the more lenient administration of President Trump, regulation-by-enforcement is a thing of the past, leaving AML/CTF and CFTC market abuse rules as the only major check on those dealing in digital assets that are not considered securities. This will remain the status quo until the stablecoin rules kick in.

In the U.K., a combination of the financial promotions regime and MLRs has made for a more restrictive environment for many digital asset players. But the government remains keen to foster a digital asset hub, and the regulator appears to be listening to market feedback in its consultation process.

So, while it may be taking its sweet time, digital asset regulation is coming to the U.S. and U.K., but market participants may need to get comfy, as it likely won’t be in force in either jurisdiction for at least another year.

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