United Kingdom

**Report on the Current Status of Retail Cryptocurrency Trading in the United Kingdom**

**Date:** 2025-06-26

**Topic:** Retail_Trading_Status

**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

**1. Current Status**

Allowed-Regulated

**2. Detailed Narrative Explanation**

Individual citizens and residents in the United Kingdom (UK) are legally permitted to buy, sell, and hold cryptocurrencies. The activity is subject to a developing but increasingly comprehensive regulatory framework overseen primarily by the Financial Conduct Authority (FCA) and HM Treasury. This framework includes stringent Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) requirements for cryptoasset businesses, taxation rules for individuals, and a financial promotions regime to protect consumers.

**Historical Context and Regulatory Evolution:**

The UK's approach to cryptoassets has evolved from a relatively hands-off stance to a more structured regulatory regime. Initially, the focus was primarily on AML/CTF compliance, with the FCA becoming the AML/CTF supervisor for UK cryptoasset businesses on January 10, 2020. This required firms carrying out certain cryptoasset activities (like exchanges and custodian wallet providers) to register with the FCA and comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).

Recognizing the growing retail investor interest and the potential risks, UK authorities have been progressively expanding the regulatory perimeter. A key development was the introduction of the financial promotions regime for cryptoassets, which came into effect on October 8, 2023. This regime means that firms promoting cryptoassets to UK consumers must ensure their communications are clear, fair, and not misleading, and often require authorization or registration with the FCA. The rules also introduced measures like a cooling-off period for first-time investors and clear risk warnings.

**Current Regulatory Landscape (as of June 2025):**

*   **Legality and General Permission:** Buying, selling, and holding cryptocurrencies by individuals is legal in the UK. However, cryptocurrencies are not considered legal tender.
*   **AML/CTF and KYC:** Cryptoasset businesses, including exchanges and custodian wallet providers, must register with the FCA for AML/CTF supervision. They are required to implement robust Know Your Customer (KYC) and AML procedures, including customer due diligence, transaction monitoring, and suspicious activity reporting. The UK has also implemented the Financial Action Task Force's (FATF) "Travel Rule," requiring the collection and sharing of information about cryptoasset transfers.
*   **Financial Promotions:** Marketing cryptoassets to UK consumers is now regulated by the FCA. Promotions must be clear, fair, not misleading, and include prominent risk warnings. Firms marketing crypto to UK consumers generally need to be FCA authorized or have their promotions approved by an authorized firm.
*   **Taxation:** Profits from cryptocurrency trading by individuals are typically subject to Capital Gains Tax (CGT). Income received from activities like mining, staking, or being paid in crypto is generally subject to Income Tax. HMRC has published guidance on the taxation of cryptoassets, treating them as property rather than currency. There is a Capital Gains Tax Annual Exempt Amount, and tax rates vary based on the individual's income tax band.
*   **Consumer Protection and Warnings:** The FCA has consistently warned that cryptoassets are high-risk investments and that consumers should be prepared to lose all their money. The Financial Services Compensation Scheme (FSCS) generally does not cover cryptoasset investments, although this is subject to ongoing review for specific product types like crypto Exchange Traded Notes (cETNs).
*   **Developing Framework:** The UK government and the FCA are actively working on a broader regulatory framework for cryptoassets. This includes proposals to bring a wider range of cryptoasset activities, such as operating a trading platform, custody services, and crypto lending, under formal financial services regulation. HM Treasury published draft legislation in April 2025 to bring cryptoassets into the FSMA perimeter, with the FCA tasked with developing detailed rules. This new regime is expected to be implemented in phases, potentially starting from Q2 2026.
*   **Crypto Exchange Traded Notes (cETNs):** In a recent development (June 2025), the FCA has proposed lifting the ban on retail investors accessing crypto Exchange Traded Notes (cETNs), provided they are traded on a recognized investment exchange. This is part of a consultation aimed at rebalancing the approach to risk and supporting the UK crypto industry's growth. However, the ban on retail access to crypto derivatives remains in place.

**Nuance and Complexity:**

The regulatory environment for retail crypto trading in the UK is dynamic and becoming more stringent. While individuals are permitted to trade, they must do so through platforms that adhere to increasingly robust regulatory requirements, particularly concerning AML/KYC and financial promotions. The distinction between unregulated tokens and those that might be considered specified investments or e-money is crucial, and the regulatory treatment can differ. The ongoing development of the broader regulatory framework means that firms and investors need to stay updated on new rules and guidance issued by the FCA and HM Treasury. The FCA's "crypto roadmap" outlines a phased approach to implementing comprehensive regulation.

In summary, retail cryptocurrency trading in the UK is allowed but is firmly within the sights of regulators, with a growing body of rules aimed at mitigating risks, preventing financial crime, and protecting consumers.

**3. Specific, Relevant Text Excerpts**

*   **HM Treasury & FCA (April & May 2025):** "On 29 April 2025, HM Treasury published the draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 (the Draft Order) and an extensive policy note. Together they drag cryptoassets into the Financial Services and Markets Act (FSMA) perimeter and set the FCA and PRA the formidable task of writing a brand-new rulebook – including the much-trailed CRYPTOPRU prudential sourcebook – inside the next twelve months." "New regulated activities include running crypto trading platforms, custody services, dealing, and arranging cryptoasset transactions — with bespoke definitions tailored to crypto markets."
*   **FCA on Legality and AML/CTF (Ongoing):** "Cryptocurrency is legal in the UK, but it is not legal tender. Anyone can buy crypto assets from crypto asset providers and store them in digital wallets." "In the UK, the Financial Conduct Authority (FCA) assumed oversight of the cryptocurrency's anti-money laundering (AML) and counter-terrorism financing (CTF) activities. That is why UK crypto exchange operations need to be FCA registered". "You must register with us if you want to provide crypto services that come within scope of the money laundering regulations."
*   **FCA on Financial Promotions (Effective October 2023):** "The new rules, which come into effect on 8 October 2023, mean that firms can only market cryptoassets to UK consumers who have the appropriate knowledge and experience to invest." "Firms promoting cryptoassets will also be required to put in place clear risk warnings and ensure communications are clear, fair and not misleading."
*   **HMRC on Taxation (Ongoing):** "In the UK, there isn't a specific tax solely for cryptocurrencies, however,cryptocurrencies are recognised as a type of property by HMRC. Individuals participating in crypto are caught by the existing tax laws and they may need to consider capital gains or income tax implications from their crypto activities." "If you're holding crypto purely as an investment, there's no tax liability while holding. However, disposing of crypto, whether by selling, exchanging, gifting (except to your spouse), or spending, counts as a taxable event under Capital Gains Tax (CGT) rules." "If you're mining, staking, receiving crypto via airdrops, or being paid in crypto, these activities are treated as income. You'll be taxed based on your income tax rate, which ranges from 20% to 45%."
*   **FCA on Retail Access to cETNs (June 2025 Proposal):** "The FCA is proposing to lift the ban on offering crypto exchange traded notes (cETNs) to retail investors. Similar products are already available in other countries. It would mean cETNs could be sold to individual consumers, rather than just professional investors, in the UK, if they're traded on an FCA-approved investment exchange (a recognised investment exchange or RIE)." "We want to rebalance our approach to risk and lifting the ban would allow people to make the choice on whether such a high-risk investment is right for them, given they could lose all their money." - David Geale, executive director of payments and digital finance at the FCA.
*   **UK Government on New Rules (April 2025):** "Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter — cracking down on bad actors while supporting legitimate innovation. Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection, and operational resilience — just like firms in traditional finance."

**4. URL Links to Sources**

*   Vertex AI Search result: How Crypto is Taxed in the UK (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: How to get a UK crypto exchange license and cryptocurrency license - Gofaizen & Sherle (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK crypto regulation – HM Treasury's draft Cryptoassets Order and what lies ahead for 2025 (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: All You Need to Know About UK Crypto Regulations—2025 Guide - Sumsub (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: FCA to lift ban on crypto ETNs to support UK growth and competitiveness | FCA (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK FCA proposes lifting ban on crypto ETNs for retail investors - Cointelegraph (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK to end ban on retail investors buying crypto exchange-traded notes | Stock Market News (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK: FCA introduces new rules for marketing cryptoassets to UK consumers - Hogan Lovells (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Crypto license in UK (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: A Guide to Crypto Tax in the UK: What Do You Need to Pay? - Crunch Accounting (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: TAXguide 01/2024: Taxation of cryptoassets for individuals | ICAEW (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Crypto Tax UK: Expert Guide 2025 - Koinly (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Crypto Tax UK: Ultimate Tax Guide for 2025 [HMRC Rules] - Blockpit (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Ultimate Guide to AML Compliance for Crypto in 2025 - Smile ID (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK regulator backtracks over ban on retail crypto trading - Central Banking (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK Crypto Regulations: An Essential Guide for 2025 - KYC Hub (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Cryptocurrency Regulations in The United Kingdom (UK) - Sanction Scanner (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: How to Buy Cryptocurrency in the UK? (2025 Updated) - NFTevening (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: The road to crypto regulation - ICAEW.com (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: UK FCA Discussion Paper Proposes Crypto Regulatory Framework and Seeks Industry Feedback | Insights | Skadden, Arps, Slate, Meagher & Flom LLP (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: The FCA introduces financial promotions on crypto assets from 8 October 2023 - Ocorian (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Crypto regulation in the UK: FCA's roadmap unveiled | SO Legal (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: KYC Requirements in the UK for 2025 [Updated] - iDenfy (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: ​​Maintaining KYC, AML & CTF Compliance across Multiple Jurisdictions for Crypto Firms - KYC Chain (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: New cryptoasset rules to drive growth and protect consumers - GOV.UK (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Blockchain & Cryptocurrency Laws & Regulations 2025 | UK - Global Legal Insights (vertexaisearch.cloud.google.com)
*   Vertex AI Search result: Cryptoassets | FCA (vertexaisearch.cloud.google.com)

**Primary Sources (Direct Links):**

*   **Financial Conduct Authority - Cryptoassets Page:** https://www.fca.org.uk/firms/cryptoassets
*   **Financial Conduct Authority - FCA to lift ban on crypto ETNs to support UK growth and competitiveness (June 6, 2025):** https://www.fca.org.uk/news/press-releases/fca-lift-ban-crypto-etns-support-uk-growth-and-competitiveness
*   **GOV.UK - New cryptoasset rules to drive growth and protect consumers (April 29, 2025):** https://www.gov.uk/government/news/new-cryptoasset-rules-to-drive-growth-and-protect-consumers
*   **HMRC - Cryptoassets Manual:** (Searchable on HMRC's website, specific CRYPTO manual sections are referenced in search results like)

**(Note:** Some direct links to specific consultation papers or draft legislation may be nested within the broader government or FCA pages and require navigation. The provided links are to the most relevant overarching pages or announcements.)