know your customer (KYC)
Why is KYC Important?
Overall, KYC is vital for maintaining regulatory compliance, mitigating risks, preventing fraud, and safeguarding customer interests.
Discover the latest UK crypto regulations for 2025, covering KYC & AML measures and key compliance steps to ensure business success and avoid penalties.
As the UK advances towards a more structured and regulated cryptocurrency landscape in 2025, crypto companies must adhere to a complex web of regulations to ensure compliance and avoid penalties. The UK government continues to refine these regulations, aiming for greater clarity and more robust protections for both businesses and consumers. Notably, electronic ID verification (eIDV), Know Your Customer (KYC) procedures and robust Anti-Money Laundering (AML) measures have become essential components of regulatory compliance.
This comprehensive guide outlines the latest UK crypto regulations for 2025 and explains how crypto companies can meet these requirements successfully.
Key Regulatory Bodies
Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) remains the primary regulator for crypto asset providers in the UK. The FCA ensures that firms implement effective AML and Countering Terrorism Financing (CFT) policies. In addition, the FCA is responsible for maintaining the crypto asset register, issuing guidelines, and overseeing the KYC and eIDV requirements essential for regulatory compliance.
Other Relevant Institutions
- HM Treasury: Oversees national financial policies, including crypto regulations.
- Bank of England: Plays a role in stabilising financial markets, including digital currencies.
- National Crime Agency (NCA): Collaborates with the FCA on AML and CFT measures.
Major Regulations in 2025
Updated AML and KYC Requirements
In 2025, crypto companies in the UK must comply with updated regulations that strengthen AML and KYC practices. Failure to comply can result in severe penalties, including fines and operational bans.
Key Compliance Requirements:
- Money Laundering, Terrorist Financing, and Transfer of Funds Regulations 2017 (MLR): Updated to integrate stricter AML standards and the latest KYC requirements.
- Financial Services and Markets Act 2000 (FSMA) and Regulated Activities Order 2001 (RAO): Define which crypto activities are regulated.
- Electronic Money Regulations 2011 (EMRs) and Payment Services Regulations 2017 (PSRs): Apply to firms providing electronic money and payment services related to crypto assets.
New Compliance Procedures for 2025
- Appointment of a Money Laundering Reporting Officer (MLRO): Responsible for overseeing AML strategies.
- Comprehensive Staff Training: Regular training programs to keep staff updated on evolving AML and KYC regulations.
- Robust Risk Assessment Frameworks: Risk-based approaches tailored to company-specific activities.
- Enhanced Due Diligence (EDD), Customer Due Diligence (CDD), and Simplified Due Diligence (SDD): Tailored verification levels based on customer risk profiles.
- Ongoing Transaction Monitoring: Real-time tracking of customer transactions for suspicious activities.
- Recordkeeping: Securely store KYC and transaction data for at least five years.
- eIDV Integration: Incorporating electronic ID verification solutions to streamline onboarding and enhance fraud prevention.
FCA Registration Requirements
Who Needs to Register?
According to FCA guidelines, companies involved in the following activities must register:
- Crypto Asset Service Providers: Engaged in exchanging crypto assets for money or operating crypto ATMs.
- Custodian Wallet Providers: Safeguard or administer crypto assets on behalf of customers.
Registration Criteria
- Conducting significant crypto activities in the UK.
- Managing UK-based operations.
- Operating ATMs or having a UK office engaged in crypto services.
Role of eIDV and KYC in Registration
eIDV and KYC solutions are pivotal in verifying customer identities, ensuring that only legitimate entities operate within the UK market. These solutions streamline compliance, reduce onboarding friction, and enhance fraud detection.
The UK Crypto Travel Rule in 2025
The Crypto Travel Rule, effective since September 2023, remains a cornerstone of UK crypto regulations in 2025. The rule mandates the sharing of specific information between crypto asset service providers to prevent illicit activities.
Key Compliance Steps:
- Collection and Transfer of Information: Providers must collect originator and beneficiary information and share it during transfers.
- Verification of Identity: Originator details must be verified using reliable, independent sources, including eIDV platforms.
- Timely Law Enforcement Responses: Companies must respond swiftly to law enforcement requests related to transaction data.
- International Transaction Monitoring: For transactions exceeding €1,000, additional verification steps apply, including verifying details associated with unhosted wallets.
- Reporting Non-Compliance: Repeated failures to provide required information must be reported to the FCA.
The Future of UK Crypto Regulations
Strategic Regulatory Developments in 2025
The UK government has announced several initiatives to strengthen the crypto regulatory framework:
- Strengthened Rules for Trading Platforms: New measures combat market manipulation practices such as pump-and-dump schemes.
- World-First Framework for Crypto Lending: Regulations now cover lending practices, ensuring consumer protection and market stability.
- Expanded Stablecoin Regulations: The scope now includes issuance, payment, and exchange activities related to stablecoins.
Enhanced Monitoring and Governance
The HM Treasury has proposed an extensive monitoring framework covering:
- Activities conducted by UK firms for domestic and international clients.
- Services offered by overseas firms to UK residents.
- Proactive monitoring using advanced technologies, including AI-powered transaction analysis tools.
Growing Role of eIDV and KYC
As regulations become more complex, electronic ID verification solutions are playing a critical role in enabling seamless KYC processes. eIDV solutions allow crypto companies to:
- Reduce friction during customer onboarding.
- Improve fraud detection rates.
- Personalise customer experiences.
- Increase operational efficiency by automating compliance checks.
Best Practices for Ensuring Compliance in 2025
To remain compliant in this evolving landscape, crypto companies should:
- Implement Integrated eIDV Solutions: Automate KYC processes and reduce manual verification errors.
- Adopt Risk-Based Approaches: Tailor compliance strategies based on customer risk levels.
- Conduct Regular Audits: Review compliance processes to ensure alignment with FCA requirements.
- Leverage Advanced Analytics: Use AI-powered analytics for enhanced transaction monitoring and risk detection.
We suggest reading our related article – What is Regulatory Compliance?
Conclusion
The UK's evolving crypto regulations in 2025 mark a significant shift towards a secure, transparent, and well-regulated digital asset ecosystem. Crypto businesses must stay updated on regulatory changes, integrate advanced eIDV and KYC solutions, and implement robust AML frameworks. By doing so, they will not only ensure compliance but also position themselves for long-term success in the rapidly evolving UK crypto market.
Please read our related article - 10 Crypto Scams You Should Be Aware of in 2025
