Zumo
Daniel Taylor
Feb 2025
Daniel Taylor, head of policy at Zumo, speaks to Karl Loomes about the FCA’s crypto authorisation gateway, what it signals for the UK’s digital assets strategy, and how firms should prepare for the full regulatory regime
Image: Zumo
From your perspective, what does the FCA’s decision to open a formal crypto authorisation gateway signal about the UK’s direction of travel on digital assets more broadly?
The crypto regulatory framework has been a long time coming. It signals clarity for business, and new protections for consumers. On crypto specifically, the pattern is quite distinct: this is about overlaying the existing financial services frameworks to accommodate cryptoasset business services.
Where you do have a bit of divergence is between ‘crypto’ — which you might say is reluctantly tolerated — and ‘digital assets’ in its wider sense. It’s the wider application of similar technology within existing financial infrastructure that is getting the more ambitious directional support, with both stablecoin payments and asset tokenisation themes getting their time in the sun of late.
How significant is this gateway in practice for crypto firms already operating in or marketing to the UK — and how disruptive might it be for those that are under-prepared?
The incoming crypto regime is a very real cliff edge for any UK-active crypto business that doesn’t have solutions in place. The regulator has been very clear: in-scope firms that haven’t applied for authorisation by the commencement of the full regime will have to withdraw from the UK market by that date. Practically, that means about 18 months for consumer-oriented crypto firms to get their UK market strategy drawn up and executed. It’s a considerable paradigm shift for multinational firms that have been serving the UK market from offshore with little more than consumer advertising approvals as their sole access barrier.
Based on your experience, what do you think firms often misunderstand about the FCA’s expectations when it comes to crypto regulation?
Given the crypto-native segment’s lack of familiarity with the rules of traditional finance, there may be a perception that the current anti-money laundering (AML)-based FCA registration process (which in itself has repelled over 8 in 10 applicants) is equivalent to the incoming regulated activities regime. Of course, it’s not — crypto firms have to prepare to become regulated investment firms, and that’s a huge and perhaps underestimated undertaking from a cold start.
How should firms think about the gateway in strategic terms — as a compliance hurdle, a credibility filter, or a long-term market- shaping mechanism?
The truth is that it’s a blend of all three. Depending on how you view it, this is a cleanse or a purge of the UK cryptoasset service provider landscape. Smaller, less TradFi-referenced firms are at greatest risk; but for those who remain, there is the opportunity to serve cryptoasset business at a whole new scale.
For balance’s sake, what we need is business-model-aware implementation support, realistically designed bedding-in provisions and a clear communication of regulatory expectations to ensure that a full spectrum of cryptoasset businesses can continue to serve the UK market.
Do you see this regime favouring certain types of crypto business models or organisational maturity levels, and if so, what does that mean for innovation in the UK market?
You need only look at the practical results of similarly wide-ranging crypto implementations — notably the Markets in Crypto-Assets Regulation (MiCA) in the EU – to realise that these are developments that favour larger, well capitalised players, and most of all those who have already been operating for many years in the traditional finance industry.
But there is certainly a way ahead for smaller businesses. What we expect to see is the emergence of a network of authorised UK intermediaries and onshore partners that will be critical in uniting UK regulatory oversight and trusted customer interfaces with international competitiveness and connectivity to the global cryptoasset ecosystem.
This is the decisive piece of the puzzle in providing businesses of all types and sizes with a continued gateway to the scaling UK cryptoasset market.
Looking ahead to the full regime expected in 2027, what are the key questions or uncertainties that firms should already be factoring into their planning today?
Right now, it’s a market access question. If firms want to continue to serve the UK crypto market — or perhaps enter it for the first time — how are they going to achieve that?
Depending on the resources and strategic priorities, that’s going to come down either to setting up shop themselves or to finding a UK regulated intermediary to facilitate it for them. And from there the scope of work is defined.
It will be interesting to see what firms ultimately decide is the most efficient and effective way to continue to deliver their core cryptoasset services in the UK.
How does the UK’s emerging approach compare with other major jurisdictions, and where do you think the UK could realistically differentiate itself on digital assets regulation?
The distinctive thing about the UK is how tightly it remains bound to its existing finance rules.
It is playing to its trust and reputation in law and in financial services — less to an open play on innovation in a more disruptive interpretation.
The UK has always been somewhat of a global infrastructure hub when it comes to financial services. With the robustness and reputation of the frameworks we have developed, there is the chance to establish a similar role within crypto. The UK boasts a growing roster of quality homegrown cryptoasset infrastructure providers.
And we think lots of businesses will be drawn to that — if not for regulation’s sake alone, then also for the assurances and trust behind the UK standard.
Stepping back from the regulatory detail, what do you think will define success or failure for the UK’s crypto framework over the next five years?
More homegrown crypto success stories, more UK crypto adoption, and much more policymaker comfort with the sector.
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