An activity is regulated in the UK if it: (a) is of a specified kind that (b) relates to a specified investment or, where it relates to a specified activity, property of any kind and (c) is carried on by way of business (d) in the UK. The specified activities and investments are set out in the RAO.

A broad range of activities are set out in the RAO, including the following:

• Accepting deposits – This covers typical retail banking activities involving the operation of current and deposit accounts.
• Issuing e-money – E-money is a prepaid electronic payment product that can be card- or account-based.
• Carrying on payment services – This covers a broad range of activities involving matters such as money remittance, card issuance, acquiring card transactions and the operation of payment accounts.
• Consumer lending – This covers both lending to consumers as well as activities such as crowdfunding, credit brokerage and debt collection on behalf of third parties.
• Arranging regulated mortgage contracts – This relates to the sale of certain residential mortgage contracts.
• Carrying on insurance business – This relates to effecting and carrying out contracts of insurance, both life and general.
• Providing investment advice – Providing advice on most categories of investments is a regulated activity in the UK. This activity covers the provision of advice on the merits of acquiring or disposing of particular investments.
• Trading in securities and other investments as principal or as agent – This covers brokers as well as most firms engaged in proprietary trading.
• Arranging transactions in investments – This activity covers the role of intermediaries in investment transactions. It is very broad and covers infrastructure providers, including electronic communication networks that route orders for execution.
• Insurance mediation activities – UK regulation covers various insurance broking activities as well as the handling of claims on behalf of the insured.
• Investment management – Managing investments on behalf of another person is a regulated activity. Specific permission is required where a person carries on this activity in relation to an alternative investment fund (AIF).
• Establishing, operating and winding up a collective investment scheme – Most types of funds are regarded as collective investment schemes under UK law. This extends to structures such as open-ended bodies corporate, unit trusts and partnerships. Certain closed-ended bodies corporate are also categorized as AIFs; for example, certain listed investment trusts are treated as AIFs.
• Providing custody (safeguarding and administration of investments) – Providing custody services in relation to assets that include investments is a regulated activity. Specific permission is required to act as the depositary of an alternative investment fund.

As noted above, for an activity to be a regulated activity, it must be "carried on by way of business." The term "by way of business" is not defined in FSMA or the RAO, but the FCA has issued guidance on "the business test" in its Perimeter Guidance Manual (PERG), based on a number of decisions by UK courts. Ultimately, whether an activity is carried on by way of business is a question of case-by-case analysis which takes into account several factors, including the degree of continuity, the existence of a commercial element, the scale of the activity, and the proportion the activity bears to other activities carried on by the same person but which are not regulated.

Cryptoasset regulation

There is currently no bespoke regime for cryptoassets and related activities. Whether a cryptoasset and related activities are regulated depends on whether the characteristics of the cryptoasset mean that it falls within the regulatory perimeter. To assist market participants, the FCA has published guidance on its approach, which sets out three broad categories of cryptoasset in relation to how they fit within existing FCA regulation:

• Security tokens, which provide rights and obligations akin to specified investments and fall within the regulatory perimeter
• E-money tokens, which fall within the scope of e-money and are subject to the EMRs
• Unregulated tokens, which are any other tokens that are not security or e-money tokens, including utility tokens (those used to access a service) and exchange tokens (e.g., cryptocurrencies).

At the time of writing, HM Treasury and the FCA have issued policy and discussion papers on the regulation of cryptoassets in the UK. HM Treasury has confirmed that it will introduce a regulatory regime for both stable tokens used as a means of payment, and for wider types of cryptoassets. The regulated category of stable tokens would refer to tokens which stabilize their value by referencing one or more assets, such as fiat currency or a commodity (i.e., stablecoins), and therefore could be reliably used for retail or wholesale transactions.

The UK government intends to take a phased approach to the regulation of cryptoassets and activities connected with cryptoassets. The regulation of fiat-backed stablecoin activities will take place in Phase 1. Activities relating to wider types of cryptoassets (including, for example, algorithmic stablecoins, and commodity-backed tokens not caught in Phase 1) will be in scope of Phase 2.

The stablecoin regime will apply to fiat-backed stablecoins only. This category will be defined in legislation – HM Treasury intends to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency or basket of currencies, and hold (in whole or in part) that currency or basket as “backing”. This does not include algorithmic, crypto-backed or commodity-backed tokens — these tokens will be captured in Phase 2 (although the UK government does not at this stage intend to differentiate between those tokens and other unbacked cryptoassets in Phase 2).

HM Treasury intends to achieve the regulation of stablecoins through a mixture of amendments to the PSRs and the RAO to bring activities within the regulatory perimeter. The activities of issuance and custody of UK-issued fiat-backed stablecoin will be included in the RAO, enabling the FCA to make rules for firms conducting these activities. Firms wishing to apply for authorization to conduct either of the issuance or custody activities will be subject to FCA rules and guidance as is usual for FCA-regulated activities. The use of fiat-backed stablecoins in payment chains will be regulated through amendments to the payment services regime in the PSRs.

Until the wider regime for regulation of cryptoassets comes into place in Phase 2, the scope of the regime will not cover the activity of facilitating the exchange of cryptoassets (including stablecoins) for other assets — this will fall within the Phase 2 activity of “operating a cryptoasset trading venue”. However, exchange providers will still need to register with the FCA under, and comply with, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) regime. This stablecoin regime will be adapted, rather than replaced, when the wider regime for the regulation of cryptoassets comes into place in Phase 2.

Whilst the regulators indicate in their roadmap that implementation of the stablecoin regime is anticipated to take place in 2025, no details have been provided on any implementation periods that may apply. Further details on the wider cryptoasset regime are expected to follow in due course.