At the end of April 2025, HM Treasury unveiled its vision for cryptoasset regulation by publishing draft cryptoasset regulations in the form of the draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025 (the CA Order).

As well as giving us the first draft of the legislation, the CA Order sheds more light on the legislators’ approach with the majority of clauses building on those already in place for Specified Activities and Specified Investments found in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO).

The CA Order also uses the definition of cryptoassets found in the Financial Services and Markets Act 2025, unchanged.  That definition is:

“any cryptographically secured digital representation of value or contractual rights that:

• can be transferred, stored or traded electronically; and
• uses technology supporting the recording or storage of data (which may include distributed ledger technology).”

Building on RAO:  the two-limbed test

RAO sets out a two-limbed test which brings participants into the FCA’s regulatory perimeter. If you conduct a specified activity in relation to a specified investment, you will meet the two-limbed test and need to be correctly authorised by the FCA.

Building on RAO:  specified investments

The CA Order creates some new type of specified investments for cryptoassets.

As well as using the existing definition of cryptoassets, it also draws on the FCA’s categorisations of tokens and keeps those tokens.

The new specified investments are set out below.

“Specified investment cryptoassets.”  These are assets which are both cryptoassets (using the FSMA 2023 definition) and Specified investments (using the definitions set out in RAO, for example, equities and bonds).

An example is a token on a blockchain that represents an interest in or right to an equity.

“Qualifying cryptoassets”.  These are cryptoassets which are fungible and transferable.  Crucially, this definition includes “qualifying stablecoin”.  Types of investment which are alreadly caught in some way are not included in this definition  So, for example, specified investment cryptoassets, which are described above and hark directly back to RAO are not caught in this definition and neither are other types of investment that could meet the definition. of a “cryptoasset” under FSMA 2023, for example tokenised e-money or tokenised deposits.

“Qualifying stablecoins”.  There are defined as stablecoins that both:

• reference one or more fiat currencies; and
• seek to hold those fiat currencies or fiat currencies and other assets as backing assets to maintain a stable value.

The holding of collateral is important as it can include the combination of fiat currencies and other assets.  For the UK, there is everything to play for here when we look at the future of the UK as a global hub for cryptoassets against MiCA’s rules on Asset Referenced Tokens (derided by many as concentrating risk) and the GENIUS Act in the US.

If the FCA is wise it will learn from both regimes and devise a commercially sound regulatory solution which allows the stablecoin industry in the UK to thrive and beat its competition.

Building on RAO:  specified activities

The CA Order draws heavily on, and amends, the RAO with the following new specified activities for the new specified investments which are cryptoasset based.  These are set out below.

“Issuing a qualifying stablecoin in the UK”.   What is interesting here is that this activity is any one of three sub-activities, meaning that it has a broad scope.

These three sub-activities, any one or combination of which amounts to issuing a qualifying stablecoin, are:

• offering, or arranging for another to offer, a qualifying stablecoin;
• undertaking, or arranging for another to undertake, to redeem a qualifying stablecoin; or
• carrying on, or arranging for another to carry on, activities designed to maintain the value of a qualifying stablecoin.

Note here as well that the definition includes the words “in the UK”.  Jurisdiction is key.

“Safeguarding”.   This is half a derivation of RAO in that it deals with safeguarding but does not include the administration of assets.  It applies to qualifying cryptoassets and relevant specified investment cryptoassets.

This second is a new type of specified activity that is only relevant for Safeguarding.  It is a type of specified investment cryptoasset that is a security or contractually based investment and has been added because securities and contractually based investments are within RAO’s safeguarding regime.  Adding it here brings the tokenised versions of existing RAO specified investments into scope.

Do note that there is a carve out for settlement activity here.  The CA Order is clear that those qualifying cryptoassets that are held on behalf of another temporarily and specifically for the purpose of settling trades are excluded from the definition of safeguarding.

“Operating a qualifying cryptoasset trading platform”.  There are parallels with MiFID II and multi-lateral trading facilities here as well as the definition of operating a cryptoasset exchange under the Money Laundering Regulations 2018.   Thus, it is another area in which we see the existing regulatory framework being built upon.

This specified activity extends to situations where qualifying cryptoassets are exchanged with either other: (i) qualifying cryptoassets; or (ii) money (including e-money).

“Dealing in qualifying cryptoassets as principal” looks back to RAO and includes cryptoasset lending and borrowing services, while arranging deals in qualifying cryptoassets” also captures the operation of a cryptoasset lending platform.

“Dealing in qualifying cryptoassets as an agent” is also a specified activity that looks straight back to what we have under RAO.

“Qualifying cryptoassets staking” includes liquid staking and works tighter with the issuance of liquid staking tokens, which is covered by the dealing activity set out above.  This use of two specified activities means that anyone who is engaging in this specified activity may need two necessary separate permissions, or an additional one.

Building on RAO:  specified activities exclusions

Again, we can look at RAO and see similarities here.  While each new specified activity for cryptoassets has its own set of exclusions, many follow familiar themes.

These include exclusions for the initial stages of design, creation minting as well as for enabling communications, some introductions, activities undertaken by group companies and the actions and payment of employees.