The UK government is getting ready to fully regulate digital assets by October 2027. The government says the goal is to make the market safer, clearer, and more trustworthy for both businesses and everyday users.

Officials say the new rules will protect consumers and stop dishonest players from operating in the market. The UK Treasury has confirmed that Bitcoin and digital asset companies will be brought under existing financial laws.

This means Bitcoin exchanges, wallet providers, and stablecoin issuers will be regulated in a similar way to banks and other financial firms. New legislation is expected to be introduced in Parliament soon.

Instead of creating brand-new digital asset laws, the UK plans to apply rules that already exist for traditional finance. This approach is closer to how the United States regulates Bitcoin, rather than the European Union’s special framework known as MiCA, which started in 2024.

Finance minister Rachel Reeves said the new system will provide “clear rules of the road.” She said the aim is to protect consumers while keeping “dodgy actors” out of the market. The government believes this familiar regulatory model will give companies confidence, and encourage responsible growth.

Two major regulators will oversee the digital assets market. The first one is the Financial Conduct Authority (FCA), which will supervise firms such as exchanges and wallet providers. These companies will need official approval and must follow rules on transparency, customer protection, and market abuse.

The FCA has already asked the public and the industry for feedback on proposed rules covering trading, listings, staking, and decentralized finance (DeFi). “Regulation is coming and we want to get it right,” said David Geale from the FCA, adding that the rules are meant to protect users while allowing innovation.

At the same time, the Bank of England is working on rules for stablecoins. These are digital assets pegged to a fiat currency and are often used for payments. Both the FCA and the Bank of England say their full rules will be ready by the end of 2026.

Stablecoins are a key concern for regulators. Proposed rules include limits on how much people and businesses can hold and restrictions on how issuers earn interest on their reserves.

Regulators say these measures reduce risk and help protect the wider financial system.

Some in the digital assets industry worry the rules may be too strict. They believe limits on interest could make UK-based stablecoins less competitive compared to those in other countries.

The framework is expected to give clearer tax rules and possible exemptions for small-scale DeFi activity. Bitcoin and other digital assets are also being treated as property for tax purposes, which should make compliance simpler for investors.

Many digital asset firms have welcomed the plan, mainly because it brings long-awaited clarity.

Aave CEO Stani Kulechov views the decision as a major positive step for DeFi, welcoming the “no gain, no loss” treatment. He added that it aligns tax rules with how lending protocols like Aave actually work. Kulechov sees it as “a win for UK users” and validation that regulators are starting to understand and fairly accommodate DeFi’s economic reality.

However, some legal experts say improvements are still needed. Natalie Lewis, a partner at law firm Travers Smith, said earlier drafts had technical problems and hoped the final law would make more than “minor” changes, pointing to “quite a few technical legal problems with the original draft.”

Others have warned against moving too fast. George Morris from law firm Simmons & Simmons called the move a “very positive step” and said regulators must give firms time to adapt, warning that forcing them into an “overnight upgrade” could deter engagement with the rules.