As of 1 January 2026, the UK introduced new reporting and oversight rules for cryptocurrency. These changes are more than just tax and compliance trivia. The new UK crypto regulations affect how software needs to work, the data you collect and store, and how your users interact with your platforms.
At the same time, the UK is working on a wider regime under the Financial Services and Markets Act, which will fully bring crypto into the financial regulatory world by late 2027.
While critics argue that the UK lags in crypto innovation compared to faster-moving global markets, this framework aims to create long-term clarity by treating crypto assets much like traditional stocks, payments, and custody services.
Chancellor of the Exchequer, Rachel Reeves MP, said:
“Bringing crypto into the regulatory perimeter is a crucial step in securing the UK’s position as a world-leading financial centre in the digital age.”
To give you more context, we’ve answered some of the crypto-related questions you may have.
Is cryptocurrency regulated in the UK?
Yes. Crypto businesses must already register with the FCA (Financial Conduct Authority) for anti-money-laundering compliance. Plus, new rules are taking effect to bring crypto under financial services regulation.
What are the new UK crypto regulations?
The UK has adopted the Cryptoasset Reporting Framework(CARF) from 1 January 2026, which requires detailed transaction and user data reporting to HM Revenue & Customs (HMRC). Beyond that, new legislation will require authorisation for things like trading platforms, custody services and stablecoin issuance.
Is blockchain used in the UK?
Yes. In the UK, Blockchain is widely used in financial services, supply chain projects and digital identity efforts.
Now, when it comes to regulations, the UK recognises blockchain as a technology, but regulators focus on the outcomes that your application produces, particularly when it involves customers and money.
The State Of Crypto Before The New Regulations
Before these new rules by the FCA, crypto assets and stablecoin activities were largely unregulated. The industry has often been described as a “Wild West.”
Crypto businesses were being operated with very little formal oversight and significant risks. In fact, most platforms only needed to meet basic anti-money-laundering requirements.
Heard of the collapse of TerraUSD?
In 2022, the TerraUSD (UST) stablecoin lost its value and erased over $45 billion in value. This prompted urgent global regulatory action to mitigate risks from digital asset market volatility.
Before the new UK crypto regulations, there were no clear rules on custody, market conduct, or consumer protection. How products were built, how risks were shown to users, and how assets were handled were mostly left to individual companies, not enforced standards.
When A Crypto Project Becomes Regulated
Before we get into the details, let’s take a step back and see why blockchain developers need to be well-versed with the UK crypto regulation rules.
If your development project is in the pre-launch phase and does not handle customer funds or identity, it will not be subject to strict finance laws.
But once you start running a service where people transfer value, store assets or trade tokens with real money, you enter a regulated zone.
Right now, the FCA and UK Treasury are in the process of finalising draft regulations that will define categories of activity that are regulated under the Financial Services and Markets Act 2000 (FSMA). Once those rules are approved, they will apply to:
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issuing certain kinds of stablecoins
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operating trading platforms
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providing custody or safeguarding services
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dealing or arranging crypto transactions and staking activities.
As of now, the regime is not fully live yet, but the transition process is well underway. Consultations, policy papers and draft sourcebooks are shaping how these rules will work.
Why These UK Crypto Regulations Matter To You
If you are building any software that affects people’s wallets, trades or savings, you need to check the current crypto regulatory rules. The software design choices you make today could affect whether your blockchain project gets regulated and how hard it is to comply.
Often, a blockchain development company decide the software architecture from a purely technical standpoint. But regulators look at the same architecture and ask different questions. They want to know who has control, how data flows, how assets are protected, and whether users are treated fairly and transparently.
Key UK Crypto Regulation Areas That Blockchain Developers Should Know
Now let’s look at some of the specific areas that will come under crypto regulation, determining how you will build and operate your platform.
1. Controlling influence in DeFi systems
When people talk about regulation focusing on centralised companies, it can seem unrelated to code. But regulators now need to keep a check on the party/parties that influence outcomes in a protocol.
If a person, company or group of founders can exercise authority over the protocol through admin keys, governance privileges or even the main frontend interface, regulators are likely to treat that project as having a responsible party. Those responsible parties can be held accountable for compliance.
A protocol that is truly immutable and has no central control points may remain outside strict rules. But the moment you introduce upgrade keys, admin controls or managed governance, you expose yourself to regulatory requirements.
For blockchain developers, this means thinking carefully about how you design governance structures, who holds what rights and how software upgrades are authorised.
2. Custody and safeguarding design
If the code you write happens to be responsible for holding or safeguarding private keys or crypto assets on behalf of users, the UK rules will require that those assets are segregated and protected.
The FCA’s current proposals around stablecoins and crypto custody suggest that custodians must hold assets in a statutory trust, separate from the firm’s own assets.
That is a legal requirement. It means your custody logic cannot allow mixing user funds with operating funds, and you must be able to prove at any time that all client assets are separately held.
So, as part of blockchain development services, you will need to design the wallet storage, account controls, reconciliation tools and backups, keeping these rules in mind.
It’s vital to build robust systems to ensure that custodied assets are fully traceable and can be redeemed by users even if your organisation shuts down or faces financial problems at a later date.
3. Reporting data for CARF
The Cryptoasset Reporting Framework requires platforms that serve UK users to collect and report detailed data about transactions and users to HMRC. What is included?
You would need to report personal identifiers like name and tax numbers, and data on every transaction, including amounts, currencies and dates.
So, if you are building data collection and storage systems that capture identity fields at onboarding, link those fields to transaction records, and create automated reporting exports.
You will need to think about secure storage of personally identifiable information, audit logs and data schema that makes it easy to generate trusted reports.
4. Market behaviour and detection tools
For obvious reasons, regulators in the UK are also concerned about fair, transparent markets. That means exchanges and trading platforms must monitor activity for suspicious patterns like wash trading or pump-and-dump activity.
You need to meet these expectations. For this, your platforms will need to integrate monitoring tools that analyse market manipulation activity in real time.
There are some teams that choose to use specialised services that flag unusual behaviour. As a developer, you must plan for APIs and systems that can feed trading data into monitoring engines. The system should also be able to respond to alerts and log findings for compliance auditors.
5. Consumer protection and user experience
Even though earlier drafts have signalled that some parts of the Consumer Duty may not apply immediately, consumer protection remains a central theme for the FCA.
Your project’s user flows would need to be designed accordingly.
So, suppose your platform offers high-risk assets, you may need to include clear risk disclosures and simple explanations of what users are about to do.
Anyone offering blockchain development services must add steps in the product that help users realise what they are about to do. This way, they will make decisions knowing the risks or consequences.
For this, developers must include more checkpoints in a user journey, risk acknowledgement forms, or even a waiting period before certain features are accessible.
Why User Tax Concerns Should Shape How Developers Build Crypto Platforms
A lot of crypto users in the UK have questions about how visible their activity is to the tax authorities. Many of them worry about what their legal responsibilities are.
Blockchain development service providers, especially those in the UK, need to care about these questions because the software you build sits between the user and HMRC.
Can HMRC see your Bitcoin?
Because of CARF, exchanges and other platforms with users in the UK will report transaction histories and personal identifiers to HMRC. That means transactions tied to your accounts are visible to tax authorities through regular reporting channels.
Do I have to declare crypto in the UK?
Yes. If your platform serves UK users, you should assume they must report crypto gains and losses on their tax returns. The platform will support that by holding accurate transaction history and identity data.
So, it’s important for any blockchain development company working with UK users to build systems that can identify users properly, track transactions clearly, and produce reliable records.
Webskitters – The Experts for Blockchain Development
Over the course of the next two years, the UK crypto regulatory environment will continue to evolve. Of course, most new rules will not suddenly come into force overnight.
But regulators are publishing consultation papers, draft rules and discussion documents now, so it is not too early to build with compliance in mind.
Are you planning to build blockchain systems that are compliant with UK crypto regulations? Webskitters Ltd. can help you design with these requirements in mind from the start.
Connect with our expert blockchain consultants today.
Frequently Asked Questions
1. Is crypto legal in the UK?
Yes, crypto is legal in the UK. However, many crypto activities are now regulated, which means platforms must follow rules set by the FCA and HMRC.
2. Do crypto exchanges need to register with the FCA?
Yes. If an exchange serves UK users, it must register with the FCA for anti-money-laundering checks and follow additional rules as new regulations apply.
3. What happens if a crypto platform does not follow UK rules?
If a platform ignores UK rules, it may face fines, restrictions, or be forced to stop operating in the UK market.
4. Will UK crypto rules affect decentralised platforms?
They can. If a decentralised platform still has people who control key parts of it, regulators may treat it as a regulated service.
