Cryptocurrency trading and broader financial activity in blockchain are no longer part of a regulatory Wild West. In both the United States and the United Kingdom, governments and regulators have moved aggressively — and cautiously — to bring crypto under established legal frameworks. For both retail traders and blockchain businesses, understanding how these laws operate is critical. Here’s a detailed look at the current legal landscape for financial activity in blockchain-based crypto trading across the U.S. and U.K.
United States: Dual-Regulator Framework and Emerging Laws
Who’s in Charge: SEC vs. CFTC
In the U.S., crypto regulation largely hinges on two major agencies:
- The Securities and Exchange Commission (SEC) oversees crypto assets it deems to be securities — for instance, tokens sold in a way that resembles traditional investment contracts. (SEC)
- The Commodity Futures Trading Commission (CFTC) regulates crypto viewed as commodities, especially when they’re traded or used in derivatives markets.
This dual-regulator model was reinforced in recent policy guidance emphasizing that “not all crypto assets are created equal.”
Key Federal Legislation: FIT21, CLARITY, and the GENIUS Act
- FIT21 (Financial Innovation and Technology for the 21st Century Act)
Passed by the U.S. House in May 2024, FIT21 was a landmark bill aimed at creating clearer roles for both the SEC and CFTC when it comes to digital assets.- Under the bill, the CFTC would regulate spot markets for what it classifies as “digital commodities.” (Davis Wright Tremaine)
- The SEC would retain authority over tokens considered digital securities, though it also builds in some exemptions for small issuances and certain investor protections.
- Issuers and exchanges would need to comply with disclosures, audits, and stricter reporting.
- CLARITY Act (Digital Asset Market Clarity Act)
This newer bill, passed by the House in 2025, seeks to refine and clarify the definitions of what makes a token a “security” or a “commodity.” Its goal: reduce uncertainty for token issuers and exchanges while providing clearer guidance on compliance. - GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act)
Signed into law in July 2025, this is one of the most significant federal laws governing stablecoins, which are tokens pegged to traditional assets like the U.S. dollar. Key features:- Requires stablecoins to be fully backed (1:1) by U.S. dollars or other liquid, low-risk assets.
- Mandates regular audits and transparency around reserves.
- Introduces dual regulation: both federal and state supervision, depending on how the stablecoin operates.
Enforcement & Compliance Risks
- The SEC has taken numerous enforcement actions against exchanges and individuals for treating unregistered tokens as securities. (Government Accountability Office)
- High-profile cases include insider-trading charges: the SEC accused a former Coinbase executive of insider trading involving crypto assets.
- On the other hand, under the current acting SEC Chair, the agency signaled a shift: in 2025, it backed away from a previously proposed rule that would have forced many crypto firms to register as exchanges.
Also read: Top Crypto Exchange and Wallet Apps in the US
United Kingdom: Building a Full Crypto Regime by 2026
Current Regulatory Landscape
In the U.K., crypto regulation has evolved rapidly:
- The Financial Conduct Authority (FCA) requires businesses that provide crypto services — such as exchanges and custody providers — to register and comply with anti-money laundering (AML) rules.
- Since October 2023, crypto promotions (ads, marketing) must follow strict rules: only authorized firms can promote crypto, and all promotional materials must clearly include risk warnings.
- Breaching these financial-promotion rules can lead to criminal penalties. (CMS Law)
The 2026 Crypto Regime: What’s Coming
The U.K. is working toward a comprehensive crypto regulation framework, expected to be fully in force by the end of 2026. Key components include:
- Authorization Gateway
New regulated activities will require crypto businesses to obtain FCA authorization, particularly for stablecoin issuance and custody of qualifying cryptoassets. (CMS Law) - Stablecoin Rules
“Qualifying” stablecoins will need to meet strict rules on redemption, reserve backing, record-keeping, and third-party audits. - Market Conduct Requirements
- Insider dealing (trading based on non-public crypto information) will be explicitly prohibited for crypto traded on regulated platforms.
- Market manipulation rules will apply to crypto listed on regulated trading venues.
- Issuers may need to disclose inside information publicly — similar to traditional securities.
- Digital Securities Sandbox (DSS)
The FCA has a “sandbox” for firms to test tokenized securities and other digital-asset business models under a modified regulatory regime.
Tax and Reporting Changes
- Starting January 2026, U.K. crypto platforms will be required to collect and report detailed user transaction data (name, address, tax ID, crypto types, amounts) to HM Revenue & Customs (HMRC).
- This comes as part of a broader push to bring crypto activity under the same tax transparency frameworks as traditional finance.
Key Risks & Take‑Homes for Crypto Traders and Firms
- Classification Matters
Whether a token is treated as a “security” or a “commodity” will dramatically affect which regulator oversees it — and which rules apply. - Compliance Is Not Optional
- In the U.S., exchanges and token issuers may need to register, disclose, or face enforcement.
- In the U.K., businesses must register with the FCA, and non-compliant platforms or promotions can face penalties.
- Stablecoins Under Close Watch
Both countries are taking stablecoins seriously: reserves, redemption, and transparency standards will likely tighten. - Reporting & Tax Risks Grow
As reporting obligations expand, crypto businesses and traders must brace for more rigorous tax compliance.
FAQ
Do all cryptocurrencies fall under SEC rules in the U.S.?
No. Not all tokens are treated as securities. Under proposed and emerging laws, some digital assets are classified as commodities, which places them under the jurisdiction of the CFTC, not the SEC.
What must a crypto business do to operate legally in the U.K.?
If a business provides crypto services in the U.K. (exchange, custody, wallet), it must generally register with the FCA, maintain AML procedures, and comply with other regulatory requirements like customer due diligence.
Will stablecoins be better regulated under these laws?
Yes. For example: in the U.S., the GENIUS Act requires stablecoins to be fully backed by liquid assets and audited. In the U.K., “qualifying stablecoins” will be subject to authorization, asset backing, and disclosure rules.
What happens if a U.K. crypto firm promotes without authorization?
Promotions must be approved by an FCA-authorized firm or comply with specific exemptions. Violating these rules can lead to criminal penalties.
How will these regulations protect everyday crypto traders?
The laws aim to:
- Increase transparency (through disclosures and audits)
- Mitigate fraud and manipulation (especially with insider dealing provisions)
- Enhance tax and reporting oversight to prevent illicit activity
- Clarify the legal status of different kinds of tokens for better investor understanding
