The UK government has released a comprehensive draft legislation, outlining its plan for regulating cryptocurrency activities for the first time. This move aims to foster innovation while safeguarding consumers by extending existing financial rules to digital assets such as stablecoins, exchanges, and custodial services. 27-page draft legislation requires crypto businesses operating in the UK to obtain approval from the Financial Conduct Authority (FCA). This approach aligns with the US regulatory framework that classifies crypto projects as securities or non-securities, rather than following the EU’s MiCAR system tailored to industry needs. The proposed regulations close gaps in the Financial Services and Markets Act by defining digital assets and categorizing them based on investment type. This will help regulators identify which crypto activities require oversight and which do not. Custodial arrangements, such as exchanges holding client funds, will also be subject to stricter rules for transparency and security. The government’s consultation period, running until May 23rd, 2025, allows for public and industry feedback before finalizing the draft laws.