Britain will bring cryptocurrencies under compulsory regulation, finance minister Rachel Reeves announced on Tuesday, signalling closer cooperation with the United States rather than following the European Union's approach to digital assets.

The draft legislation will extend existing financial regulations to crypto companies operating in the UK, with the government aiming to finalise the new rules by the end of this year.

"Under the new rules, crypto exchanges, dealers and agents will be brought into the regulatory perimeter - cracking down on bad actors while supporting legitimate innovation," the finance ministry said in a statement following Reeves' announcement.

Around 12 per cent of British adults currently own or have owned cryptocurrencies such as bitcoin or ethereum, up from just 4 per cent in 2021, highlighting the growing importance of the sector.

Reeves revealed she had discussed crypto regulation with US Treasury Secretary Scott Bessent during her visit to Washington last week, with further discussions planned for June.

"Crypto firms with UK customers will also have to meet clear standards on transparency, consumer protection, and operational resilience," the finance ministry added.

Financial services experts noted that Britain's approach aligns more closely with American regulatory philosophy than with the European Union's tailored framework.

"The move explicitly aligns the UK with the US approach of 'crypto as securities' – and represents a divergence with the EU's more tailored approach to crypto under the MiCAR regime," said Nick Price, financial services and crypto specialist at law firm Osborne Clarke.

Price described it as a "simple and straightforward piece of legislation" that would bring certainty, stability and consumer protection to the sector.

The rules will include regulation of stablecoin issuers, but only those based in the UK. Stablecoins are digital currencies designed to maintain a fixed value relative to traditional currencies or other assets.

Bank of England governor Andrew Bailey has frequently warned about investment risks associated with bitcoin, though he has been more supportive of regulating stablecoins.

The announcement comes as US President Donald Trump has embraced cryptocurrencies and promised to reduce regulatory restrictions on the industry, causing concern among some European officials. Euro zone finance ministers expressed worry last month that the US approach could affect monetary sovereignty and financial stability.

Reeves also announced plans to outline broader strategies for boosting Britain's financial services industry on July 15 in her annual Mansion House speech, following a consultation process that began in November 2024.

In last year's speech, the finance minister suggested British financial regulators had been excessively risk-averse in the years following the global financial crisis. Last week, chief executives from HSBC, Lloyds Banking Group, NatWest Group and Santander UK sent Reeves a letter urging her to scrap the ring-fencing regulation introduced after the 2008 financial crisis, arguing it hampers economic growth and is now "redundant".

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