The proposed regulations will cover various operations, including crypto asset trading platforms, stablecoin issuance, and custody services, aiming to eliminate bad actors and enhance consumer protection.

The consultation on the crypto regulatory framework, which began under the previous Conservative government, continues under the current Labour government, indicating a commitment to ongoing dialogue with stakeholders.

The UK government has unveiled draft legislation aimed at regulating cryptocurrency exchanges, dealers, and agents to enhance consumer protection and stimulate innovation in the digital asset space.

During a fintech conference, Treasury Minister Reeves stated that crypto firms would be regulated similarly to traditional financial institutions, reflecting a commitment to high international standards.

This initiative is part of a broader effort to address the evolving landscape of financial technology and ensure a secure environment for digital assets.

Research shows that around 12% of UK adults have engaged with cryptoassets, a notable increase from just 4% in 2021, highlighting the growing interest in this sector.

However, critics warn that stringent regulations could stifle innovation by increasing operational costs and slowing product development within the industry.

Industry leaders, including Coinbase's UK head, have expressed concerns that the UK risks losing its competitive edge in fintech and crypto innovation to markets like the US and Singapore.

Reeves's announcement follows her discussions in Washington with US officials about potential trade deals and cooperation on crypto regulation, emphasizing the importance of international collaboration.

The legislation will also apply to overseas firms serving UK retail clients, requiring them to obtain authorization from the Financial Conduct Authority (FCA).

This regulatory framework aims to set global standards for cryptocurrency regulation, balancing the need for innovation with the necessity of protecting consumers from fraud.

Legal experts note that the UK's regulatory approach aligns with the US model while diverging from the EU's tailored regulations, potentially offering greater stability and consumer protection.