Isadora Arredondo, Vice President of Global Policy at Hedera and former FCA official, commented that the UK’s ambition to become a global hub for cryptoassets has failed to gain significant momentum. Rather than outright resistance from regulators, she singled out conflicting regulatory priorities and a disconnect between policymaking and on-the-ground implementation as the primary culprits.
Divergence between policy goals and real-world execution
In an interview from London, Arredondo explained that while the UK’s regulatory ambitions look impressive on paper, they have not kept pace in practice. Having served at the Financial Conduct Authority (FCA) during and after Brexit, she underscored the FCA’s critical role in shaping the UK’s crypto regulatory regime as a major financial regulator.
Arredondo emphasized that there is a significant difference between the stated policy goals and how those goals are executed in practice—a gap that has contributed to the UK’s slow progress in the crypto sector.
She traced much of this slowdown to the FCA’s burdensome agenda between 2018 and 2021. Initially, Brexit forced the agency to rewrite many rules to fit a new, post-EU reality. This was quickly followed by the onset of the COVID-19 pandemic, which shifted attention to crisis management across the sector.
After the pandemic focus, high-profile investment collapses such as London Capital & Finance and the Woodford Fund further shaped priorities. These events steered the FCA to place stronger emphasis on consumer protection, bringing cryptoassets increasingly under this lens.
Major institutions advance faster, startups face more hurdles
Arredondo described the UK’s approach to crypto as unfolding along two distinct tracks. While established financial institutions and wholesale market players have seen relatively bold and proactive regulatory engagement, newer startups and businesses targeting retail investors are confronting prolonged and complex approval processes.
She added that the regulator exhibits greater proactivity when dealing with the institutional side of crypto, but small firms are forced to fit into existing frameworks, which results in extended licensing timelines.
Unlike the European Union, which introduced a customized crypto rulebook under MiCA, the UK mostly relies on adapting existing regulatory frameworks. For new entrants, this can mean repeated assessments by multiple teams and lengthy application journeys. The UK’s targeted crypto regulatory measures are expected to fully take effect by October 2027.
Meanwhile, the Bank of England is treading cautiously regarding stablecoins. In its latest framework—unveiled after the interview—the bank backed away from previously discussed caps for individuals and institutions, opting instead for a temporary limit of £40 billion on the total circulation of any single systemically important stablecoin.
Next step for digital currencies: Interoperability
In her role at Hedera, where she monitors governmental and central bank digital currency (CBDC) trends, Arredondo observed that technology itself is no longer the main focus. Instead, she argued, industry players should aim for interoperability: ensuring that various blockchain networks, stablecoins, and digital currency projects can operate seamlessly together using shared standards.
Glossary: CBDC refers to digital currencies directly issued by central banks. Interoperability means ensuring diverse networks, payment systems, and digital asset infrastructures can transfer data and value through common standards.
Arredondo pointed to the European Union as a leading example, where stablecoins, tokenized bank deposits, and central bank digital currencies are being developed to coexist within a single framework. She noted that the growing influence of major banks, asset managers, and institutional players in crypto does not signal a betrayal of the industry’s founding values, but rather the mainstreaming of those ideas into traditional finance.
