The UK at a Digital Asset Crossroads: Insights from the Westminster Roundtable

Not First, Not Second — But Still on the Field: The UK’s Chance to Be a Smart Mover on Crypto

Over the last five years, the UK has tried to regulate crypto without truly deciding what its position on it should be. Instead of building a strategic framework, policy has moved forward through improvisation — stretching existing rules to fit a new market that was never designed to operate inside them. The result is a patchwork regulatory perimeter held together by guidance notes, exemptions and interim permissions.

Anti-money laundering rules under the MLRs became a temporary licensing system. The Financial Promotions Order became a proxy for conduct oversight. FSMA definitions were extended to digital assets that barely resemble traditional financial instruments. And yet, after years of consultations and ministerial statements, the UK still does not have a coherent framework for crypto market structure, trading venues, custody, or stablecoins.

This isn’t a question of regulatory intent. Successive governments have said they want the UK to be a hub for digital assets and tokenisation. But ambition alone hasn’t translated into architecture. Policy has drifted — moving between innovation statements and enforcement signals, between growth rhetoric and risk language. And while other jurisdictions have now moved into structured implementation, the UK remains at the stage of interpretive policymaking: regulating by retrofit.

The change of administration in 2024 sparked optimism that this would shift — that the UK would finally define a forward position rather than a defensive one. Early signalling suggested a more coherent model: proportionate regulation, measured competitiveness, and responsible market access. But a year in, progress has been cautious, even hesitant. The FCA’s evolving stance on cETNs and staking, and the Treasury’s phased approach to market structure and stablecoins, suggest movement — but not yet momentum.

The UK is no longer a first mover. It isn’t a second mover either. But it does still have an opportunity: to be a smart mover. To learn from what has worked — and what hasn’t — in the EU, the US, Singapore and Hong Kong. To build a framework that is interoperable but not imitative. To regulate innovation without suffocating it. But that window is not endless. The time to act is now.

From Speed to Strategy: The Debate Has Moved On

Last week, we joined policymakers, regulators, industry leaders and legal practitioners at a Westminster roundtable to discuss the future of UK crypto regulation. The conversation was different this time. In previous years, debates in London have often circled around a familiar question: is the UK moving fast enough? That question now feels tired — and increasingly irrelevant.

Speed is no longer the problem. The problem is coherence.

It is clear that the UK cannot win a race that has already been run. MiCA is already in force across Europe. Singapore has operationalised a live regime for digital assets. The US has moved from ambiguity to enforcement and is now shaping a market structure bill with clear political backing. The UK is not in a sprint anymore — it is in a design phase, and that is a fundamentally different challenge.

If the priority before was “move faster,” the priority now must be “move smarter.” The window is not for being first — it is for getting it right.

And that means one thing above all: learning intelligently from other jurisdictions. Not copy-pasting. Not reacting. Not over-correcting. But studying what works elsewhere, what clearly doesn’t, and adapting the best foundations to the UK’s legal system, market dynamics and institutional environment.

Europe offers lessons in stability and perimeter clarity — but also exposes the risks of inflexibility. Singapore has demonstrated proportional licensing and strong operational standards — but still faces scaling constraints. The US has shown the power of enforcement — but also the cost of regulatory uncertainty. Each model contains value, but none are directly transferable.

The UK’s advantage now is perspective. It has the rare benefit of being able to design fourth, with full visibility of what came before. That is not a weakness — it is an opportunity, if handled with intent. But the roundtable highlighted a shared concern: unless the UK shifts quickly from consultation to direction, that opportunity will narrow, and the country will end up with another interim framework built from partial fixes rather than structured design.

Getting this right means moving past the defensive mindset of retrofitting crypto into legacy rules. It requires building a forward regulatory model that is practical, interoperable, innovation-aligned and enforcement-ready. That was a recurring theme in Westminster: this is the moment for the UK to define how it regulates — not just when.

Learn Strategically: Take What Works, Avoid What Fails

If the UK wants to build smart regulation rather than fast regulation, it must resist the temptation to legislate in isolation. Good policy learns — not by copying, but by extracting strategic lessons from how others approached the same challenge. Two lessons stood out strongly in Westminster: one from the United States, and one from the European Union.

From the United States: Regulation is an economic strategy, not just a legal framework

The US has treated digital assets, especially stablecoins, not only as a financial product but as a strategic instrument of economic power. Stablecoins have become a form of monetary export: every dollar-denominated stablecoin held abroad strengthens global dollar usage, entrenches US capital markets, and indirectly channels demand into US treasuries through reserve requirements.

This is crypto mercantilism: using digital asset infrastructure to expand economic influence. The US understands this. That’s why stablecoins are increasingly linked to broader policy interests: liquidity, reserves, sanctions enforcement, and global market infrastructure. It is not about libertarian finance anymore. It’s about strategy.

The UK must learn from that. A digital asset framework is not just a matter for the FCA — it is industrial policy, financial access policy, foreign policy, and city competitiveness policy all at once. Treated correctly, regulation can:

• Anchor GBP-backed stablecoins into global payment rails
  
  
• Strengthen UK participation in cross-border finance
  
  
• Support exports of financial infrastructure
  
  
• Reinforce market standards aligned with UK law and values

The worst mistake the UK could make right now would be to regulate digital assets as if they are an incidental niche. They’re part of the next phase of financial architecture.

From the EU: Avoid repeating a well-intentioned rigidity

The EU’s MiCA framework delivered something the world needed: regulatory clarity at scale. It deserves credit for bringing supervision to stablecoins, custody, and trading platforms. But MiCA has also revealed its limitations — especially as firms attempt to scale.

The UK should learn from MiCA not only what to do, but also what to avoid:

• Over-restrictive localisation requirements that push liquidity and infrastructure offshore
  
  
• Reverse solicitation rules so narrow they are effectively unworkable
  
  
• No meaningful path for regulatory equivalence or third-country access
  
  
• Operational rules that conflate risk with geography rather than activity
  
  
• Strict investment and deposit constraints for stablecoin reserves, limiting innovation
  
  
• Issuance caps tied to EU payment systems that do not reflect how crypto actually scales

MiCA proved that clarity beats uncertainty. But rigidity is not a competitive advantage. If the UK mirrors the EU too closely, it won’t differentiate, it will duplicate. A UK framework must offer what MiCA does not: flexibility without fragility. If the EU built the first complete digital asset regime, the UK can build the first globally interoperable one.

Regulation Must Be Global by Design, Not UK in Isolation

One of the strongest messages from the Westminster roundtable was clear: crypto is inherently global, and regulation that ignores that will fail by design. The UK has a strategic choice to make. It can build a regime that is outward-facing, interoperable and connected to global markets — or it can drift into regulatory isolation, building a “Fortress UK” model that becomes slow, duplicative, and commercially unattractive.

The direction matters because crypto markets do not stop at borders. Liquidity flows across jurisdictions. Risk moves across chains. Supervision will have to rely on shared standards and cross-border cooperation. If firms are forced to fragment operations — one stack for the UK, another for the EU, another for Asia — the UK will not scale as a hub. It will become a compliance outlier, and outliers lose relevance.

To avoid that, the UK needs to embed interoperability into regulation now, not retrofit it later. That means:

• Pursuing equivalence and reciprocal arrangements with other major jurisdictions instead of building rules that only work domestically.
  
  
• Avoiding hard localisation requirements that force infrastructure, liquidity or custody to physically sit in the UK when risk can be managed through supervision instead.
  
  
• Aligning standards where it makes sense — like custody, operational resilience and disclosure — to prevent firms from having to rebuild policy frameworks jurisdiction by jurisdiction.
  
  
• Preserving cross-border access for responsible firms rather than closing the perimeter and pushing activity offshore.

Isolation is not protection. In digital markets, it simply means losing visibility as activity moves elsewhere. True supervision depends on collaboration — on data exchange, shared definitions, cross-border casework and consistent risk signals. That is only possible if frameworks are compatible.

The firms we spoke with at Westminster were aligned: no one wants a race to the bottom — but no one wants a walled garden either. The UK should not compete on light-touch regulation. It should compete on intelligent regulation — regulation that works in a global system rather than trying to contain it.

This is why the next phase of policymaking must not only define what the UK regulates — market structure, custody, stablecoins — but how those rules interact across borders. Equivalence strategies, supervisory gateways and outcome-based compliance models are not optional extras. They are the conditions that will determine whether the UK stays globally relevant — or stands alone.

Competitiveness Cannot Be Reserved for Incumbents

A third theme from the Westminster discussion was one that too often gets lost in policy drafting: regulation must be built for the full market, not just for the biggest players. If the UK wants a competitive digital asset economy, it cannot design a framework that only global banks and major TradFi institutions are structurally able to comply with.

This is a real risk. We’ve seen it before. When regulation becomes too heavy, too complex, or too operationally expensive, it doesn’t create safety — it creates exclusion. It pushes smaller firms out, shrinks the innovation base, and consolidates the market in the hands of those with the deepest legal budgets and compliance infrastructure. That is not competitiveness. That is controlled market capture disguised as reform.

Crypto was born as an open innovation system. That doesn’t mean it should be unregulated — but it does mean regulation must be proportionate. A small, well-run startup that offers wallet custody should not face the same supervisory burden as a systemically important clearing house. Proportionality is not leniency. It is intelligent engineering.

The UK has a chance to design proportionality into the framework from day one. That means:

• Creating tiered authorisation and reporting regimes based on risk and scale, not corporate size
  
  
• Providing safe access routes for early-stage firms through regulatory sandboxes that actually lead to permissioned operation
  
  
• Avoiding capital rules that are misaligned with business models
  
  
• Encouraging outcomes-based regulation, where compliance is measured by performance and risk evidence, not paperwork volume

Innovation is not a talking point — it’s a market structure reality. Economies grow when new entrants can challenge incumbents on fair terms. If the UK builds a regime that is only realistically navigable by clearing banks and FTSE firms, it won’t become a digital asset hub. It will just become another market that wrote innovation out of the future.

A fair competitive market is not an unregulated market. It is a level market. And getting that right will define whether the UK becomes a centre of digital asset development, or simply the next jurisdiction where innovation leaves and never comes back.

Remove Structural Barriers: Debanking and “Risk-Off Compliance” Must End

There is no point building a regulatory framework for digital assets if firms cannot access basic financial services. This was one of the most urgent realities raised at Westminster: market access in the UK is not determined by law — it is often determined by bank policy.

Today, too many legitimate crypto businesses are denied bank accounts, payments connectivity or access to fiat rails — not because of proven risk, but because of risk-avoidance disguised as compliance. Debanking has become a silent market filter. It does not appear in any regulation, yet it shapes who can operate in the UK more than any statutory requirement.

This is not prudence. It is informal regulation by institutions, and it is corrosive to competitiveness. When banks apply blanket restrictions rather than risk-based assessments, the result is predictable:

• High-quality firms with strong compliance programs are locked out of the market
  
  
• Innovation is exported to more accessible jurisdictions
  
  
• Illicit actors move to less visible channels
  
  
• Supervisory visibility decreases, not increases
  
  
• The UK loses credibility as a serious home for financial innovation
  

Risk must be managed — but it must be managed transparently and proportionately. There is a crucial difference between regulatory compliance and institutional de-risking. Compliance is about demonstrable controls and accountable operations. De-risking is about avoidance. The first gives regulators confidence. The second undermines it.

If the UK is serious about regulated growth, then financial access must be part of the regulatory conversation. That means:

• Embedding fair access guidance that prevents blanket debanking of licensed firms
  
  
• Establishing supervised banking corridors for digital asset businesses
  
  
• Requiring clear risk rationale when access is restricted — not opaque refusals
  
  
• Encouraging shared risk infrastructure, so banks are not forced to assess crypto firms in isolation
  
  
• Holding institutions to the same risk-based principles they expect of the industry

Growth cannot be regulated into existence. It must be enabled. And it won’t matter how well-crafted the UK’s crypto regime becomes if firms can’t even hold a bank account to operate under it. Access to fiat is not optional infrastructure — it is the foundation of regulatory credibility.

Consumer Protection Should Protect People, Not Push Them Underground

Another clear theme from the Westminster roundtable was that consumer protection must evolve beyond paternalism. Too often, digital asset policy assumes retail users do not understand risk. The data tells a different story.

In the UK, around 8% of adults hold listed shares. More than 12% already hold crypto. That reality matters. It means crypto is not a fringe market serving a small demographic of uninformed risk-takers. It is now a mainstream asset class held alongside traditional investments. Policy must reflect that.

Rigid restrictions do not protect consumers. They drive them elsewhere — to offshore exchanges, unregulated apps, and peer-to-peer channels where risk is higher and protection is weaker. A regime built around restricting access will not reduce exposure — it will simply push activity into the shadows, making harm more likely and supervision harder.

Real consumer protection is not about telling people what they can’t do. It’s about building a market where they can participate safely.

That means:

• Smart safeguards instead of blanket bans — limit leverage for retail, but allow controlled exposure
  
  
• Transparency over prohibition — risks disclosed clearly, not buried in disclaimers
  
  
• Access with accountability — give users protected routes to invest, rather than blocking them until they go offshore
  
  
• Suitability frameworks that reflect reality, not legacy assumptions
  
  
• Supervised choice — where users can choose risk levels with clear consequences rather than be locked out entirely
  

Crypto markets become safer when they are brought inside a regulatory perimeter that users trust. They become more dangerous when exclusion forces them outside it.

This is not a call for deregulation. It’s a call for proportional regulation that treats consumers as capable adults in need of clarity, not fragility. Regulation should not make digital assets harder to access legally than illegally — because that’s not protection. That’s a policy failure disguised as caution.

The UK now has a chance to lead with a model of consumer protection that balances freedom with safeguards, risk with transparency, and access with accountability. If done correctly, it won’t just protect individuals — it will build trust in the system as a whole.

Good Regulation Fails Without the Capacity to Supervise It

One point echoed repeatedly at Westminster was simple but often ignored: regulation is only as strong as the system that enforces it. You can write elegant rules, design ambitious frameworks, and announce strategic roadmaps — but if supervisors don’t have the expertise, tooling, or operational capacity to implement them, then regulation becomes theory.

Crypto markets move in real time. Risk evolves through code, liquidity, and behavioural incentives. Supervising that world requires more than legal interpretation — it requires technical proficiency, on-chain literacy, and data-driven oversight. A regulator looking at PDFs while risk moves through smart contracts will always be behind the curve.

If the UK wants credibility, it must invest not only in policy, but in supervision.

That means:

• Specialist talent inside regulators who understand blockchain architecture, token mechanics, and risk indicators
  
  
• Real-time monitoring capabilities — not quarterly reporting designed for analogue markets
  
  
• On-chain analytics and forensic tools that match or exceed industry standards
  
  
• Cross-functional enforcement teams that combine legal, technical, and financial crime expertise
  
  
• Data-sharing pathways with banks, exchanges, custodians and other jurisdictions
  
  
• Clear supervisory playbooks so compliance expectations are transparent, consistent and enforceable
  

Industry does not fear strong regulation. It fears inconsistent regulation — where supervision varies by team, by interpretation, or by resource gap. The fastest way to build trust is predictability. Firms will invest in compliance if they believe the system is coherent and navigable.

And that is why regulatory capability is a competitiveness issue. If the UK builds rules it cannot enforce, serious firms will not commit to the market — and unserious firms will exploit it. If it builds credible regulation backed by capable supervision, it will attract globally trusted institutions and responsible innovators.

A framework without execution is a press release. A framework with supervision is a financial system.

Shaping the Outcome, Not Just Receiving It

At ComPilot, we were grateful to contribute to the Westminster roundtable and to hear directly from policymakers, regulators, and market participants who understand what is at stake. These discussions matter — not because the industry wants lighter rules, but because it wants workable rules. A framework that is usable, enforceable and globally connected.

One thing is clear: we don’t just want to comply with whatever framework eventually emerges. We want to help shape it. The worst approach the UK could take now would be a “regulate first, think later” model — pushing out rules in isolation and managing the unintended consequences years later. That is how fragmentation happens. That is how risk moves outside the perimeter. That is how ambition turns into bureaucracy.

The UK has an opportunity to do this differently — to build a framework designed with real industry input, informed by global insight, and backed by capable supervision. But that will only happen if industry is treated as a partner in the regulatory design phase, not as an observer of it.

We’re committed to being part of that process. Alongside our partners at Nexera and Evergon, ComPilot will continue to engage with policymakers to offer practical perspectives from the front lines of compliance, market infrastructure and digital asset risk. Regulation will shape the future of this market — and we believe those who operate in it every day should help shape regulation in return.