The UK government is preparing sweeping legislation to bring cryptocurrencies and related firms under tighter regulation, placing much of the sector on a similar footing to traditional financial securities and setting an implementation target of October 2027, according to government briefings and reports on Monday.

The planned regime would expand the Financial Conduct Authority’s oversight beyond the current, more limited anti-money laundering registration system, requiring many cryptoasset businesses — including exchanges, wallet providers and other intermediaries serving UK clients — to meet standards on authorisation, customer checks and consumer protection that more closely resemble those applied to mainstream financial services.

Ministers have also signalled an intention to restrict, or potentially ban, political donations made in cryptocurrency, citing concerns that digital assets can make it harder to verify the true source of funding and could be used to channel illicit or foreign money into British politics. The move follows high-profile political use of crypto fundraising, including Reform UK’s decision to accept bitcoin donations.

The finance ministry has said the full crypto regulatory regime is expected to start in October 2027, with detailed rules developed in the run-up to that date. Reporting by Reuters said the government plans to extend existing financial services rules to cryptoassets rather than create a wholly separate system.

Under the approach being developed, crypto firms operating in the UK would be required to register and, in many cases, seek authorisation from the FCA, with tougher expectations on anti-money laundering and counter-terrorist financing controls, including customer due-diligence and transaction monitoring. Firms would also face conduct requirements intended to strengthen consumer protection, such as clearer risk disclosures and rules around how customer assets are held and safeguarded.

The push is being framed by ministers as an attempt to balance support for financial innovation with tighter controls after repeated warnings about fraud and consumer harm in the crypto market. Chancellor Rachel Reeves and City minister Lucy Rigby have presented the planned framework as part of Labour’s ambition for the UK to be a leading centre for digital finance, while arguing the sector should not be allowed to operate as a lightly supervised “Wild West”, according to reporting by The Guardian and the Financial Times.

The Bank of England is expected to develop complementary requirements focused on stablecoins and financial stability risks, with Reuters reporting that the central bank’s work is due to be completed by the end of 2026, ahead of the broader 2027 start date for the regime. Stablecoins — digital tokens designed to maintain a fixed value, often by being pegged to a currency such as the US dollar — have become a focus for regulators globally because of their growing use in payments and trading, as well as their potential to create systemic risk if widely adopted without robust safeguards.

Alongside the financial regulation plans, the government has recently moved to modernise the legal status of digital assets. Earlier this month, the Property (Digital Assets etc.) Act came into force, recognising digital assets as personal property in UK law, a change intended to provide greater clarity for ownership, inheritance and legal redress in cases such as theft, according to statements highlighted by the Law Society and the government.

Ministers and regulators have faced rising pressure to strengthen crypto oversight after a series of high-profile cases involving alleged fraud and money laundering. The Guardian has linked the renewed regulatory urgency to major criminal investigations involving crypto holdings, including a case in which authorities said they seized bitcoin worth billions of pounds.

Political donations are emerging as a parallel flashpoint. While current electoral law does not explicitly single out cryptocurrency, parties are required to accept donations only from permissible sources and to take reasonable steps to verify donor identity. Electoral Commission guidance has said that if a donation is made in crypto, the recipient should still identify the donor and report the value in pounds at the time the donation is received.

However, ministers and anti-corruption campaigners have argued that crypto transfers can complicate transparency, particularly when funds are routed through offshore platforms or services that obscure transaction trails. The Guardian has reported that ministers are considering measures to restrict or ban crypto political donations, but have also acknowledged that a full ban is unlikely to be ready in time for the forthcoming elections legislation currently being prepared.

Reform UK’s embrace of bitcoin donations has intensified scrutiny, with the party pitching crypto fundraising as a modernisation effort. Critics, including transparency groups, have warned that accepting donations via crypto payment infrastructure based outside the UK’s regulatory perimeter could create new vulnerabilities for political finance.

The Treasury has not yet published draft legislation setting out the precise scope of cryptoassets covered, or how decentralised finance tools and non-custodial services might be treated. Those details are expected to be central to industry lobbying and parliamentary debate as the government moves from broad policy direction to statutory text and FCA rulemaking ahead of the planned 2027 start date.