The United Kingdom’s ambition to become a global hub in the digital asset sector is slowing down due to political obstacles and regulatory confusion. Jonny Fry, a specialist in blockchain and global banking, told CoinDesk that bureaucratic delays are significantly postponing the implementation of a comprehensive legal framework for crypto in the country. According to Fry, these lags could cost the UK its competitive edge over centers like Washington and Brussels.
Confusion among regulatory bodies
One of the core issues concerning crypto regulations in the UK is the fragmented distribution of responsibilities and unclear authority lines. There is a lack of clear boundaries set between the Treasury, the Bank of England, and the Financial Conduct Authority (FCA), which has complicated payment and investment domains. While the private sector is pressing for swift moves to boost market efficiency, the public side is notably sluggish in its response.
Fry highlights another critical concern: the UK risks not only the relocation of crypto companies but also the outflow of digital asset infrastructure development to other countries. While the Treasury is preoccupied with drafting a legal framework, the FCA focuses on public sector stablecoin projects and the Bank of England on the digital pound. Fry points out that this fragmented method creates deep uncertainty for businesses.
“On one side, the Treasury is creating legislative measures, while on the other, the FCA is focused on government-backed stablecoins and the Bank of England is promoting the digital pound. This piecemeal approach generates profound operational uncertainty.”
This confusion among regulators impacts not only business planning but also the very functioning of the currency itself. A major question surrounds how tokenized deposits and digital assets will align with the principle of currency singularity.
Mini glossary: The FCA (Financial Conduct Authority) is the regulatory institution overseeing financial companies and markets in the UK. It ensures both consumer protection and the integrity of the financial system.
Frustration grows over slow progress
Amidst this complex environment, some major digital asset firms have opted to relocate to countries with more transparent and rapid regulatory processes. Fry cited the example of derivatives platform Deribit, noting that clear legal guidance stating that staking would not be classified as a collective investment scheme could have encouraged the platform to move to the UK. This scenario, he argued, likely cost the government hundreds of millions of pounds in tax revenue following Coinbase’s acquisition of the platform.
“If we had clearly defined that staking is not a collective investment plan, Deribit might have moved to the UK.”
Andrew MacKenzie, CEO of the sterling-backed stablecoin developer Agant, also commented to CoinDesk that while the regulatory process is moving in the right direction, its pace remains insufficient.
Cautious central bank approach pressures private sector
A recent report from the Financial Times highlighted disappointment within the sector over the Bank of England’s highly cautious steps. While companies are calling for rapid integration, the restrictive measures adopted by the Bank on stablecoins have led to significant regulatory bottlenecks. The FCA, squeezed by political pressures and central bank monetary policy concerns, continues to emphasize controlled test environments as its main communication channel.
Gradual implementation and future outlook
Matthew Long, Director of Digital Assets and Payments at the FCA, described the regulatory path as a “comprehensive structure built step by step” and noted that applications are being accepted and firms are receiving support at this stage.
Experts warn that if the UK fails to adapt rapidly to market conditions, the dominance of dollar-based stablecoins, with their greater liquidity, is likely to increase. Without a competitive digital pound, private companies will likely continue to use US-based stablecoins for payments.
The new set of regulatory rules is scheduled to come into effect in October 2027. Until then, ongoing uncertainty in the sector is expected to affect company investment and innovation decisions.
