The United Kingdom has confirmed that it will begin regulating cryptoassets from October 2027. While this move brings greater clarity for the industry, the regulatory approach adopted by the UK marks a clear departure from that of the European Union.
At first glance, the UK framework may appear broadly aligned with global trends. In reality, it reflects a deliberate strategic choice: the UK is integrating cryptoassets into its existing financial regulatory system, rather than creating a parallel regime tailored specifically to the crypto industry. This places the UK closer to the United States model than to the European Union’s MiCAR framework.
In the European Union, the Markets in Crypto-Assets Regulation (MiCAR) is often described as “bringing crypto into regulation.” While this is accurate, the method by which it does so is critical.
MiCAR establishes a bespoke regulatory framework for cryptoassets. It introduces:
Crypto firms become Crypto-Asset Service Providers (CASPs), regulated under a system that runs alongside traditional financial services law rather than being fully embedded within it. This parallel structure provides legal certainty in some areas, but also creates new interpretative questions, particularly where crypto activities intersect with established financial concepts.
The UK has chosen a different route. Instead of creating a distinct “crypto world,” it is extending existing financial regulation to cover crypto-related activities. The regulatory perimeter is drawn around the activity itself, not the technology underpinning it.
Staking provides a clear example. In the UK, staking is analysed directly as a regulated activity. In the EU, by contrast, staking is still assessed indirectly through existing MiCAR service categories. This leaves room for interpretation and, consequently, regulatory uncertainty, even where supervisory outcomes may eventually converge.
The contrast between the two regimes is most evident in the treatment of stablecoins.
Under MiCAR, fiat-referenced stablecoins are treated as a form of tokenised money and are pulled towards electronic money regulation. This brings with it significant regulatory discipline, but also complexity and, in some cases, uncertainty as to classification.
The UK, while intending to regulate stablecoins, has consciously avoided categorising them as e-money tokens. This keeps stablecoins within the scope of financial regulation, but outside the rigid payments framework. The result is a more flexible regulatory treatment, albeit one that will require careful navigation as rules develop.
For firms operating across both the EU and the UK, these distinctions matter. Regulatory outcomes may appear similar on the surface, but the underlying legal analysis, supervisory questions, and areas of uncertainty are already diverging.
Assuming automatic alignment between MiCAR and the UK regime would be a mistake. Businesses must understand how activities are characterised in each jurisdiction and where regulatory risk and discretion sit.
As crypto regulation continues to evolve, strategic regulatory planning will be essential for firms seeking to operate seamlessly across multiple markets.
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Author: Dr Ian Gauci