Cryptocurrency Regulations in The United Kingdom (UK)

Cryptocurrency has taken the financial world by storm by offering new avenues for innovation, investment, and even routine transactions. However, of course, it goes without saying that innovation comes with the need for robust regulatory frameworks, which is crucial for businesses, investors, and enthusiasts involved in cryptocurrency to understand. With this guide, we will walk you through the regulatory landscape of cryptocurrency in the United Kingdom.

Is Cryptocurrency Legal in the UK?

Yes, cryptocurrency is legal in the UK, but it is essential to note that cryptocurrencies like Bitcoin and Ethereum are recognized as property, not legal tender. It is important to know how they differ in order to further proceed in this regard. This distinction stems from the implications for their use and taxation in the UK. Actual difference comes from its legal status of property, allowing it to be traded/held/invest,ed and despite being very rare, it can be used as a payment method.

Who Regulates Cryptocurrency in the UK?

Understanding the Role of the FCA

Since January 2020, all crypto-focused firms operating in the UK have been required to register with the Financial Conduct Authority (FCA), which is the primary regulator for cryptocurrency activities in the UK.

Key Responsibilities of the FCA:

The FCA plays a supervisory role to ensure whether cryptocurrency activities align with global standards on security, transparency, and fairness or not. To be more specific, it ensures that crypto firms comply with stringent AML requirements. Crypto firms also need to be listed in the FCA’s UK Cryptoasset register, and the enforcement is guided by frameworks such as the Money Laundering Regulations of 2017 (as amended) and the Financial Services and Markets Act of 2023. 

What Are the FCA’s Requirements for Crypto Firms?

Operating a crypto-focused business in the UK goes beyond simply registering with the FCA. Firms must adhere to stringent guidelines to maintain compliance.

Key FCA Requirements

If you wish your firm to comply with FCA, then you should monitor transaction activities and verify customer identities (Know Your Customer/KYC). Implement measures to verify customer identities and monitor transaction activities. You should also screen for sanctions and PEP lists so that you can ensure that clients and transactions do not breach sanctions or politically exposed person (PEP) regulations. Your firm must promptly report any suspicious activities to the FCA. Also, adherence to the travel rule shouldn’t be overlooked, which necessitates firms to collect and share sender and recipient data for cross-border transactions above £1,000.

What is a Crypto License in the UK and How to Get It?

A crypto license in the UK is a requirement for businesses to register with the Financial Conduct Authority (FCA) so that they can engage in cryptoasset activities. This registration is a compulsory registration under the UK’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regime rather than being a licence in a traditional sense. 

 How to Get a Crypto License (FCA Registration)? 

Step 1: Establish a UK Legal Entity

Step 2: Appoint Key Individuals

Step 3: Prepare FCA Application

Step 4: Submit to FCA via Connect Portal

Step 5: FCA Assessment

What Are the Cryptocurrency Tax Rules in the UK?

Taxes on cryptocurrency transactions are administered by HM Revenue & Customs (HMRC). Many first-time investors are surprised to learn that cryptocurrency transactions are not tax-exempt.

Breakdown of Cryptocurrency Tax Obligations:

Important Tax Note:

Crypto holders in the UK must report their gains as part of their self-assessment tax return to comply with HMRC regulations.

What Is the Travel Rule and How Does It Apply in the UK?

The Travel Rule, established by the Financial Action Task Force (FATF), serves as a global standard for financial transactions, including cryptocurrencies, and it is enforced as a part of AML regulations in the UK.

How the Travel Rule Functions:

The Travel Rule applies to Virtual Asset Service Providers (VASPs), and if the transactions exceed £1,000, firms are required to collect, verify, and share detailed sender and recipient information for qualifying transactions. If not, VASPs may face substantial penalties or operational bans for crypto firms. 

Penalties for Non-Compliance

The UK imposes strict penalties for firms that fail to meet crypto regulations, in which the FCA plays a crucial role in holding extensive enforcement powers, including issuing fines, revoking registrations, and even pursuing criminal prosecutions. Businesses that fail to comply with regulations may face significant financial penalties. For instance, the temporary FCA register removed over 250 companies because they failed to meet required standards. 

What Are the AML and KYC Obligations for Crypto Firms in the UK?

Since January 2020, all cryptoasset businesses operating in the UK must register with the Financial Conduct Authority (FCA) and comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 — commonly referred to as the MLRs. These concern crypto exchanges, custodial wallet providers, and other Virtual Asset Service Providers (VASPs), and in case of non-compliance, can lead to registration refusal, fines, or even criminal charges.

 1. Customer Due Diligence (CDD)

Customer Due Diligence (CDD) on both individual and corporate customers must be carried out by all crypto firms. CDD includes verifying customer identity using reliable documents, collecting proof of address, understanding the nature and purpose of the business relationship, and maintaining records for 5 years minimum. Lastly, for corporate clients, UBO (Ultimate Beneficial Ownership) checks are mandatory. 

2. Enhanced Due Diligence (EDD)

On the other hand, EDD is required for high-risk situations, including Politically Exposed Persons (PEPs), clients from high-risk jurisdictions (as listed by FATF), complex or unusually large transactions ,and transactions without an apparent economic purpose. Also, Enhanced Due Diligence involves obtaining additional ID documents, source of funds/wealth checks, senior management approval before onboarding, and continuous monitoring of the business relationship.

3. Ongoing Transaction Monitoring

Crypto firms must put automated transaction monitoring systems into effect to detect suspicious patterns, flag rapid movements between wallets, and monitor customer behavior against expected activity. Also, it is obligatory for these systems to be risk-based, which means they should be tailored to the customer profile and updated regularly. 

4. Compliance with the Travel Rule

The FATF Travel Rule has been implemented in the UK as part of AML controls for crypto firms, and the first obligation of the FATF Travel Rule requires firms to collect, verify, and transmit sender and recipient data. Furthermore, the information must accompany the transaction between VASPs and should be applicable to both domestic and cross-border transfers. If we are to detail the required data, it consists of full name, account number, crypto address, and physical address or national ID.

5. Recordkeeping & SARs

Crypto firms must maintain complete AML/KYC records for at least 5 years, submit Suspicion Activity Reports (SARs) to the National Crime Agency (NCA) in case they suspect money laundering or terrorism financing, and lastly, designate a nominated Officer (MLRO) to oversee internal reporting.

6. Risk-Based Approach Implementation

Firms must adopt a documented Risk-Based Approach (RBA), evaluating each customer’s risk level, conduct periodic risk reviews and policy updates and internal training and audits must be performed regularly.

How Crypto Businesses Can Stay Compliant in the UK

The stakes for compliance are high, but effective adherence is achievable with the right strategy and in order to do so, businesses must adopt a proactive approach to understanding and meeting regulatory obligations.

Checklist for Compliance:

To comply, full FCA registration must be completed to meet regulatory standards, as well as the adoption of robust AML and KYC protocols to further strengthen security and compliance. Also, to identify and mitigate high-risk activities, transactions must be monitored continuously, and being in alignment with FSMA 2023 requirements must be ensured. Last but not least, a business always needs to stay audit-ready by preparing thoroughly for regular compliance reviews.

Compliance not only ensures legal operation but also builds trust among customers and stakeholders.

Tools to Simplify Compliance

As the landscape evolves, managing regulatory demands can prove to be challenging, and this is exactly where solutions like Sanction Scanner come into play.

Key Features of Sanction Scanner:

With Sanction Scanner, your business may conduct real-time Name Screening for sanctions, PEPs, and watchlists as well as use comprehensive transaction monitoring supported on risk-based rules. We also allow your business to implement automated workflows for ongoing compliance management and API integration for smooth and scalable AML/KYC processes. Sanction Scanner allows your business to streamline compliance processes without overburdening internal teams.

Crypto-Friendliness Scorecard: United Kingdom (2025)

People consider the UK an innovation-friendly hub for digital assets, which can be attributed to a few things, such as its well-established financial system and its maturing regulatory framework. Now, the country is considered "moderately crypto-friendly".

 Overall Crypto-Friendliness Rating: 6.8 / 10

(Balanced between investor protection and tech innovation)

Top Traded Cryptocurrencies in the UK (2025)

Cryptocurrency interest in the UK continues to grow, and trading volumes reflect this strong retail and institutional interest. Based on exchange volume and wallet holdings, we have listed the most traded cryptocurrencies.

According to FCA's 2023 survey, 10% of UK adults had owned crypto and this number is expected to rise with greater regulatory clarity.