Britain is set to introduce a regulatory plan for the encryption industry to alleviate concerns about policy uncertainty.

The UK government is set to develop plans for regulating the cryptocurrency industry this month, in an effort to dispel the shift in the industry sparked by the Trump administration in the US. This move aims to reassure businesses about their prospects in the UK. Sources say that the UK Treasury is planning legislation in two areas: stablecoins (tokens pegged to assets with lower volatility like the US dollar) and a separation legislation sought by cryptocurrency providers to exclude so-called betting services from current financial regulations. As the Trump administration's tendency to relax cryptocurrency regulations was celebrated by the industry when he won the election, it brought a huge boost to assets including Bitcoin. The risk facing the UK is that startups may look to other jurisdictions like the US with clearer or more favorable rules. Trump promised to make the US the global capital of cryptocurrencies, fired SEC Chairman Gary Gensler, created a government-owned Bitcoin reserve, and ensured that all future Bitcoin mining would be done within US borders. The Conservative government led by former Prime Minister Sunak had initially planned to introduce legislation this summer, as part of his promise in 2022 to attract digital asset businesses and make the UK a global crypto center. However, Sunak decided to hold elections in July and the Conservative party lost, delaying the timetable. The current Prime Minister Starmers' Labour government has put the plan on hold. Legislation on stablecoins aims to pave the way for the Financial Conduct Authority (FCA) to consult with the industry on regulations. Investors who lock their tokens to help maintain the operation of the blockchain in exchange for a small return are expected to receive a new classification to avoid being considered collective investment schemes and subjected to additional scrutiny. The industry will view the equity investments as providing technical services rather than being classified as direct asset management implied by collective investment schemes. The Treasury spokesperson for the UK refused to comment. An FCA spokesperson said that the FCA plans to release a roadmap for regulating the cryptocurrency industry "soon". Two sources indicated that the roadmap may include a timeline for the FCA to release a consultation paper on stablecoins early next year, followed by phased regulation of other areas of cryptocurrency. Sources said that the UK government will also update the industry on the progress of the Digital Securities Sandbox (DSS), an experimental blockchain environment jointly operated by the FCA and the Bank of England. Executives and lobbying groups have revealed that the lack of progress in UK legislation has made cryptocurrency companies cautious about investing resources in the UK, especially as comprehensive regulation of the cryptocurrency market within the EU is expected to be fully implemented by the end of this year. Laura Navaratnam, UK policy lead at the Crypto Council for Innovation, said, "The UK has a real opportunity to capitalize on the advantage of being a latecomer, but it needs to get moving. We've even gone a bit further than the Treasury and regulators would ideally expect." The UK Treasury announced last year that clearer regulations on specific areas of cryptocurrency would be provided by 2024. Previously, the UK government had consulted on legal tender-backed stablecoins and passed the broader Financial Services and Markets Act in June 2023.