Table of Contents

• You might want to know


• Main Topic


• Key Insights Table


• Afterwards...

You might want to know

1. Why has the U.K.'s stated ambition to become a major crypto hub advanced more slowly than expected?

2. How might interoperability and common standards shape the next phase of digital money?

Main Topic

Isadora Arredondo, who previously worked on policy at the U.K. Financial Conduct Authority (FCA) and now serves as vice president of global policy at Hedera, offers a perspective on the U.K.'s crypto ambitions that emphasizes institutional constraints and competing priorities over simple hostility to the sector. Drawing on her experience during a period that included Brexit, the COVID-19 pandemic and high-profile investment failures, Arredondo argues that the real obstacle has often been the space between policy intent and practical execution.

During her FCA tenure, Arredondo witnessed how the regulator's agenda was reshaped by a sequence of urgent demands. The need to rewrite large portions of the regulatory rulebook after Brexit consumed considerable resources and attention. Soon after, the COVID-19 crisis moved the organization into a crisis-response mode focused on emergency lending schemes, bank forbearance and other immediate financial-stability measures. Those demands left fewer bandwidth and resources for fast-moving, bespoke frameworks for a nascent and technically complex industry.

When operational capacity returned to steadier footing, the FCA's focus had been influenced by several high-profile failures in the investment sector that shifted emphasis toward consumer protection. As Arredondo describes it, leaders within the regulator became more inclined to view crypto through the lens of retail risk and investor harm. That context helps explain why the U.K. approach has evolved along two distinct tracks: a proactive, facilitative stance for institutional and wholesale engagement, and a comparatively cautious, legacy-rules-driven approach for startups and retail-facing firms.

On the institutional side, the FCA has been relatively hands-on. Initiatives such as the Digital Securities Sandbox and various collaborations with banks and large financial institutions exploring tokenization demonstrate an openness to practical experimentation. In this sphere, regulators have worked with established firms to pilot new structures and to adapt legacy processes for tokenized activity. Arredondo notes that for major institutions, the FCA’s culture is often "forward-looking, proactive, and hands-on," enabling projects to advance in a controlled, supervised environment.

By contrast, smaller crypto companies and retail-focused platforms have largely been asked to fit novel activities into existing regulatory frameworks that were not designed for them. Unlike the European Union’s Markets in Crypto-Assets (MiCA) framework, which created a bespoke regulatory regime for a broad set of crypto activities, the U.K. has favored adapting legacy rules. That means startups can face extensive authorization processes, repeated inquiries from different teams, and prolonged timelines to secure the approvals they need. Industry participants frequently interpret these frictions as regulatory hostility, but Arredondo frames them as the by-products of competing internal priorities and a conservative tilt toward consumer protection.

This dual-track reality has policy consequences. For firms that can secure institutional partners or qualify for sandbox-style engagements, the U.K. regulatory environment can be enabling and provide a pathway to legitimacy and scale. As Arredondo puts it, "While playing by the U.K.'s rules is incredibly difficult, it pays off. Well-regulated businesses thrive, bringing a baseline of institutional credibility." For smaller innovators, however, the absence of a clear, crypto-specific legal regime has created uncertainty that slows growth and can push some activity offshore or into jurisdictions with clearer, faster rules.

An important recent example of regulatory recalibration is the Bank of England’s revised approach to stablecoins. Rather than capping individual holdings by consumers and businesses as previously proposed, authorities moved to a macro-level guardrail that limits the total issuance of any single systemic stablecoin to £40 billion (about $50.6 billion). The shift reflects a nuanced balancing of financial-stability concerns and market utility, and it also illustrates how incremental, iterative policymaking is still shaping the U.K.’s crypto landscape.

Beyond the question of domestic regulatory design, Arredondo highlights a more technical but equally strategic challenge: interoperability. Over the past decade the ecosystem has evolved as a constellation of separate blockchain networks, proprietary stablecoins, tokenized deposits and experimentation with central bank digital currencies (CBDCs). As many actors build "very cool things," fewer resources have been devoted to ensuring those systems can communicate reliably and safely with each other.

Arredondo argues that the next phase of digital money will depend on developing common standards and interoperability frameworks that allow stablecoins, tokenized bank liabilities and CBDCs to coexist and interoperate. She points to approaches in the European Union that seek to accommodate multiple forms of digital money under a coherent framework as a practical model for how different systems might be aligned while preserving regulatory objectives such as consumer protection and financial stability.

Finally, Arredondo addresses the debate over the increasing role of major financial institutions in crypto. Some early proponents see this shift as a betrayal of decentralization ideals. Arredondo offers a different reading: the adoption of crypto-inspired innovations by banks and asset managers demonstrates that core ideas from the crypto space are being absorbed into mainstream finance. In her view, rather than representing abandonment, institutional adoption signals that the economic questions raised by early crypto — about programmable money, permissioned settlement, and new forms of asset representation — have entered the mainstream discussion about how money is organized and trusted.

Taken together, Arredondo’s account suggests that the U.K.’s slower-than-expected progress toward a full-blown crypto hub is not a single-faceted problem of antagonistic policymaking. Instead, it is a product of resource constraints, shifting regulatory priorities driven by acute crises and investor protections, and the absence of a unified, tailored legal framework for retail crypto activity. Resolving these issues will likely require both structural regulatory reform and public-private collaboration on technical standards.

Key Insights Table

Afterwards...

Looking forward, the U.K. faces a choice. It can continue to refine existing rules and rely on iterative, sector-by-sector adaptation, or it can pursue a clearer, crypto-specific legal framework that reduces uncertainty for startups and retail markets. Parallel to legal reform, cross-sector collaboration on interoperability standards will be crucial: without agreed technical and settlement conventions, tokenized assets, stablecoins and prospective CBDCs risk becoming siloed innovations with limited composability.

If policymakers, regulators and industry participants can align incentives around both robust consumer protections and accelerated standard-setting, the U.K. may still realize its hub ambitions — not by favoring one class of market participant over another, but by building a predictable, interoperable ecosystem that supports both institutional innovation and responsible retail access.

Disclosure: This article synthesizes public commentary and reporting on regulatory developments and industry perspectives to present a consolidated, neutral account of the issues described by a former regulator turned industry policy leader.