Key Words
Cryptoassets- Digital assets that use cryptography and distributed ledger technology.
Stablecoin- Crytpoasset designed to maintain value by being pegged to a fiat currency such as USD.
Anti-Money Laundering (AML)- Regulations that have to reduce financial crime.
What’s Happening?
In December 2025, the UK government introduced a revised draft of the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2025. This marks a significant shift towards formally regulating the cryptoasset market within the UK financial system.
The draft legislation expands the definition of cryptoassets to include stablecoins and introduces a range of new regulated activities, such as trading, safeguarding, and custody of cryptoassets. It also establishes a market abuse regime, imposing disclosure obligations and requiring systems to detect and prevent misconduct.
Previously, many crypto firms only needed to register under AML regulations, focusing primarily on financial crime prevention. Under the new regime, firms conducting cryptoasset activities must now obtain full financial authorisation, bringing them in line with traditional financial institutions.
During AML they were monitored for: Customer identity checks, Transaction monitoring, Reporting suspicious activity and financial crime controls.
Now they are monitored for: Consumer protection, Market conduct (ensuring transparency, cracking down on market manipulation etc.), Capital requirements(Ability to absorb losses), Governance Standards (Clear requirements of management), Safeguarding Client assets and Fair trade rules( Equal access to information).
The Legal Issues
Regulatory Burden
Firms previously subject only to AML requirements must now comply with a much broader regulatory framework, significantly increasing compliance burdens and costs.
Market Abuse And Transparency
With new rules requiring firms to implement systems to protect investors, it raises the question of how they are going to implement these rules in such a decentralised and volatile crypto market. The current solution is that they regulate companies such as Binance which provide crypto wallets. By regulating these firms, they are essentially regulating the flow of money within crypto. With these firms being subject to the new transparency rules, it would give regulatory bodies insight into personal information and purchases.
Regulatory Arbitrage
Firms may move their services abroad to reduce compliance costs.
High Operational And Governance Requirements
Smaller firms may struggle to meet the new requirements such as capital adequacy and governance structures.
Why This Matters For Lawyers
Regulatory Compliance
Lawyers will advise crypto firms on how to receive authorisation by complying with new regulations. They will also help in structuring or re-structuring their clients firms to meet governance standards.
Aid In Structuring And Risk Management
Lawyers can help firms ensure they are collecting and sharing data lawfully. This is done by helping companies design compliant data collection processes and draft privacy policies.
Structuring deals And Transactional Work
The increase in regulations would also signal an increase in legitimacy, allowing for increased investor confidence. Lawyers will play a huge role in structuring deals, partnerships and investments into the crypto sector.
Aid In Market Conduct
Lawyers must guide firms on market abuse rules, disclosure obligations, and how to implement monitoring systems.
Dispute Resolution
With stricter rules, disputes may arise relating to breach of regulation, litigation/arbitration if personal information is not stored and processed properly, mis-selling, etc.