The UK’s new cryptoasset regime and the path to institutional integration

Ian Taylor of CryptoUK shares his views on the UK’s next phase of regulation-fuelled institutional adoption as frameworks begin to take shape.

In 2027, the UK is expected to introduce formal regulations for digital assets that will bring this sector within the full regulatory perimeter of financial services for the first time.

For banks, payment providers, treasuries, stablecoin issuers and other market participants, regulatory clarity is essential, as it will allow these institutions to operate with greater certainty and predictability. While this new regime will demand more from firms, the key question for policymakers is whether it will help position the UK as a leading global hub for digital assets.

In practice, institutional participation in emerging markets is rarely driven by innovation alone. In many financial institutions, digital assets are already moving far beyond innovation labs and product teams and into group risk, compliance and board-level governance discussions as regulatory frameworks begin to take shape. However, larger institutions typically prefer a clear regulatory environment before they are willing to commit capital, build infrastructure or develop new products. 

Clearer standards can reduce uncertainty, improve comparability between providers and give institutions greater confidence when evaluating counterparties.

Ian Taylor, Board Adviser and Director at CryptoUK and Chief Operating Officer and Partner, ht.digital, believes that bringing digital assets into the regulatory perimeter is likely to support broader institutional adoption over time.

“Across financial services, when something moves inside the regulatory perimeter it usually increases adoption,” says Taylor.

“Highly regulated institutions often cannot participate until there is clarity around the rules.”

For many institutional players, regulation is less of a constraint and more of a prerequisite for entering the market and adopting digital assets at scale.

What we know about the UK’s FSMA regime so far

One of the main indicators of the maturation of the UK market is its attempt to formalise the definition of a cryptoasset offer. This aims to minimise any ambiguity and clarify expectations around how these assets can be brought to market.

Responsibility for disclosure is also being defined more clearly, with new liability for misleading statements or material omissions. This should create a more structured environment for assessing assets, issuers and other risks, which can help streamline the due diligence process for institutional counterparties.

The FCA’s proposed disclosures also go further than promotional messaging by moving towards a regime in which governance, technology, controls, conflicts of interest and underlying risk factors need to be articulated more clearly.

For institutional investors and counterparties, this type of disclosure framework can play an important role in strengthening market transparency. It allows firms to evaluate digital asset providers using criteria that are more familiar within traditional financial markets.

Taylor believes this alignment with established financial market standards will be one of the most important developments for the sector.

“When firms know what the expectations are from regulators, it becomes much easier to plan,” he says. 

“If you are building products or services around digital assets, you need to understand what the regulatory framework is going to require.”

As regulatory expectations become clearer, digital assets are increasingly being evaluated through the same governance, safeguarding and risk-management frameworks that institutions apply to other financial market infrastructure.

By classifying core crypto market activities as designated activities, the UK is attempting to build a framework for crypto markets that enables them to function more like other regulated financial markets.

The regime also introduces explicit rules on:

Inside information

Information relating to a cryptoasset or issuer that has not yet been made public but could significantly influence the price of that asset if disclosed. Establishing clearer rules around how this information is handled helps bring crypto markets closer to the transparency standards expected in traditional financial markets.

Insider dealing

The use of non-public, price-sensitive information to trade cryptoassets or influence trading activity. As in traditional financial markets, prohibiting insider dealing is intended to protect market integrity and ensure that participants operate on a level informational playing field.

Unlawful disclosure

The improper sharing of inside information with third parties before it has been made public. By defining this behaviour more clearly, regulators aim to prevent information advantages from being selectively distributed among market participants.

Market manipulation

This includes actions designed to artificially influence the price, liquidity or trading activity of a cryptoasset. Common examples include spreading misleading information, placing deceptive orders or creating false signals about supply and demand.

Another strong signal of institutional alignment is the development of a dedicated market abuse regime for cryptoassets, which brings familiar concepts – such as inside information, insider dealing and market manipulation – into the regulatory framework of digital assets.

This means the UK is beginning to define what normal conduct should look like in cryptoasset markets. Establishing clearer expectations around behaviour and transparency may help create an environment that is more recognisable to institutional participants.

Taylor notes that for many institutions, these types of safeguards are essential before digital assets can be treated as part of a broader financial market infrastructure.

For large institutions, robust risk management and market integrity are fundamental.

“If you want institutional participation, you need a framework that provides those safeguards,” he adds.

Registration under existing AML regulations was never intended to act as a formal institutional model for digital assets. However, full authorisation sends a clearer signal to the market that cryptoasset providers operating in the UK will be held to account to the same standards as other regulated financial services.

This includes expectations around governance, controls, operational resilience and customer protection. For institutional counterparties, these factors are often as important as product capability when evaluating potential partners or infrastructure providers.

What moving inside the regulatory perimeter means in practice

For digital asset businesses themselves, however, moving inside the regulatory perimeter will require practical adjustments across multiple aspects of their operations.

One of the most immediate changes is likely to be how firms allocate internal resources. According to Taylor, regulatory change often forces companies to re-prioritise their product development roadmaps.

“When new regulatory frameworks come into force, firms often have to divert resources away from building new features or improving user experience and instead focus on becoming compliant,” he explains.

This was already visible during the implementation of the UK’s financial promotions regime for cryptoassets, which required many firms to modify marketing practices, onboarding processes and user interfaces in order to meet new regulatory requirements.

“It’s going to cost you more money and divert time away from these other things,” Taylor says.

“But if you want to offer products and services that involve cryptoassets, being compliant becomes a priority rather than something that can be addressed later.”

In practice, this means compliance considerations will increasingly need to be incorporated into product design, operational processes and governance structures from the outset. In larger financial institutions, this shift is likely to move digital asset oversight away from product experimentation and into formal governance processes that will be managed by risk and compliance teams.

One of the most important questions about the UK’s new cryptoasset regime is whether regulation will accelerate institutional adoption. Historically, many banks and financial institutions have been cautious about engaging with digital assets, largely because of regulatory uncertainty.

The UK’s position in the new global regulatory landscape

This move towards more structured governance is closely linked to a bigger question facing the sector: whether greater regulatory clarity will ultimately encourage deeper institutional integration in digital assets, at least for companies with a UK presence.

The UK’s regulatory approach should also be assessed in the context of broader international developments.

The EU has already introduced frameworks like the Markets in Crypto-Assets Regulation (MiCA), while the US’s CLARITY Act – a bill that would formally structure digital assets, is currently under consideration in the US Senate.

For digital asset businesses, regulatory clarity – even if imperfect – can sometimes be preferable to prolonged uncertainty.

Taylor notes that companies building new products or services often need visibility on the regulatory environment in which they will operate.

“If firms are investing in new teams, infrastructure and product development, they need some level of certainty about what the regulatory framework will look like,” he says.

Without that clarity, companies may hesitate to invest or may choose to develop products in jurisdictions where the regulatory rules are already defined.

As a result, the competitiveness of the UK’s regulatory framework will depend not only on its technical requirements but also on its ability to provide a clear and workable environment for digital asset firms.

Preparing for the transition

While the full framework is still developing, digital asset firms operating in the UK are already beginning to prepare for the changes ahead.

According to Taylor, the most important step for firms is to engage early with the regulatory transition rather than waiting for the final rules to take effect.

“Six months can pass very quickly when you’re trying to implement new compliance processes or governance structures,” he says. “Firms should start engaging with advisers, industry groups and regulatory guidance now so they understand what will be required.”

Industry associations, legal advisers and specialist service providers are already helping firms interpret emerging regulatory expectations and assess potential gaps in their current operating models.

For companies that begin preparing early, the transition may also present strategic opportunities.

Firms that can demonstrate strong governance, operational resilience and regulatory readiness may find themselves better positioned as institutional capital continues to assess the digital asset ecosystem.

In that sense, the UK’s new regime is not only about regulatory oversight. It is also about creating the conditions that will enable digital asset markets to mature and integrate effectively into the broader financial system – while ensuring the UK remains one of the more attractive destinations for the talent that will drive this transition. For firms already operating in the sector, this may require significant investment in governance, operational resilience and compliance capabilities. 

However, firms that prepare early and align with the direction of travel may find themselves at a competitive advantage as institutional capital continues to evaluate opportunities in digital assets.

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