The UK was once poised to leap into the digital asset space in a strategic attempt to offset the economic self-harm of leaving the European Union.
The goal was to transform the City of London into a global crypto hub, yet that ambition currently looks less like a roadmap and more like a daydream. While the square mile remains the home of traditional finance, its professional investors are increasingly frustrated by a lack of regulatory clarity that has left them hamstrung.
According to the Gemini State of Crypto UK report, published in Oct 2025, 24% of UK respondents owned cryptocurrency, an increase from 18% in 2024. Since that peak, the market has undergone a brutal correction. Bitcoin has halved in value and the total crypto market cap fell off a more than $2 trillion cliff. In a move that highlights the local malaise, the very exchange operator behind that report announced it would quit the UK entirely. Despite this, the long-term opportunity remains, leaving London’s private wealth and asset managers desperate for the regulatory guardrails required to advise their clients.
Sandmark spoke to private client asset managers, institutional investors and wealth managers throughout January and February to understand the impact of this legislative vacuum. The prevailing sentiment is one of extreme caution. Most regulated firms refuse to provide any crypto investment services because they lack the necessary regulatory guardrails and fear the perceived risks. The paralysis means that managers at UK-based regulated financial firms are reluctant to discuss their interactions with clients openly, as the regulations are still under development.
Some are bolder, though they remain the outliers and include companies based abroad with units in the UK. Currently, just over 60 crypto-focused firms are registered with the Financial Conduct Authority (FCA), including big names from the TradFi world such as BlackRock, Fidelity and Standard Chartered. This is the reality of the sector in the UK, despite the positive vibes from the Treasury, which is keen to avoid being perceived as outdated or failing to keep up with the US.
The UK’s regulatory regime, which will put crypto assets on a similar footing to traditional finance products, is not expected until October 2027. In the meantime, the FCA has opened up Cryptoasset Exchange Traded Notes for retail investors, allowing them to hold crypto in tax-efficient Individual Savings Accounts. However, they are classified as qualifying investments within the Innovative Finance ISA, a niche product designed for high-risk peer-to-peer loans and are not covered by the UK’s Financial Services Compensation Scheme. These made up only 0.08% of all ISAs in 2023, according to the government’s revenue & customs department, with new subscriptions dropping since then.
Charlie Erith, Founder and Senior Portfolio Manager of Wiston Capital, is clear about the approach: "The UK’s regulatory approach is the right way," he said, "though investing in crypto could also be covered with a big sign saying, 'This is Risky'".
Asset managers largely agree that the demand from private investors in the UK is now firmly established. One wealth manager noted: "There is increasing demand for exposure to crypto assets, either directly or through a vehicle like ETFs. We certainly can’t simply ignore crypto assets: they are here to stay. And our analysts keep crypto assets under constant review." A client relationship manager said: "It’s very important that we understand the market and can give some advice, even if we can’t actually help our client invest in the absence of regulatory guardrails."
They declined to be named in this story as some rules have not yet been implemented.
Demand is, unsurprisingly, stronger among the next generation of investors. "Younger clients always ask if we can invest in some crypto for them. And I always have to turn them down," said another manager. "But I do advise them to buy some crypto themselves so they can learn how the market works."
Sentiment is very different in the US, according to Euan Rellie, Managing Partner of BDA, an M&A firm based in New York. He said individuals have done very well by investing in crypto assets in recent years and now want to replicate that success with corporate and institutional investments. The major difference is that it is easier to meet that demand in the US. As a result, said Rellie, "it will happen more quickly and more confidentially."
"We need to give the Trump administration credit for being on the front foot on digital currency. It has been bold about breaking down barriers to innovation around digital currencies and blockchain," Rellie added.
Both the GENIUS and the CLARITY Acts will require significant amounts of work to implement. Joe Castelluccio, a partner at Mayer Brown covering fintech and digital assets, and Justin Slaughter, vice president of regulatory affairs at Paradigm, both suggested at the recent City and Financial Global’s London Tokenization Summit that it could be years before the detailed rules are finalized.
However, the US finance sector has a history of responding immediately to new laws, before formal regulations are in place, relying on existing risk frameworks. The UK typically has a more cautious approach.
Institutional movement in Europe is currently largely outside the UK. UBS is planning to introduce cryptocurrency trading services for private banking clients, though initially in Switzerland. With Bitcoin recently trading between $60,000 and $70,000, compared with $126,000 in Oct 2025, crypto ETFs were proving popular with Swedes, Germans and the Swiss, while Americans withdrew funds, data from CoinShares showed. Meanwhile, BlackRock has lodged a filing with the US Securities and Exchange Commission for a new Bitcoin ETF that would generate income by selling options, another step in how mainstream investors access exposure.
Regulation always takes time to catch up with technology, but the hope for UK managers is that it’s not too late to compete internationally when the rules finally arrive in 2027.
