Former FCA Insider on the Gap Between the U.K.'s Crypto Ambitions and Execution

According to former FCA policymaker Isadora Arredondo, Brexit, crisis management, and slow licensing are holding back the U.K. crypto market. Unlike MiCA, the U.K. keeps trying to fit crypto into existing frameworks, with extra pressure on stablecoins.

Key Takeaways

• The United Kingdom wants to become a leading crypto hub, but according to former FCA policymaker Isadora Arredondo, policy goals and execution are out of sync.
• The FCA gave more priority to Brexit, the COVID-19 crisis, and consumer protection, which meant crypto got less attention and smaller firms face slow approvals.
• Arredondo argues for interoperability and shared standards across blockchain networks, stablecoins, and digital money projects, using the EU as an example.

The United Kingdom's ambition to grow into a leading crypto hub is running into a basic gap between policy plans and how those plans actually get carried out. Isadora Arredondo, a former policymaker at the Financial Conduct Authority (FCA) and now vice president of global policy at Hedera, says that mismatch is a big reason the U.K. crypto market is not growing faster.

The Impact of Brexit and Crisis Management

During her time at the FCA from 2018 to 2021, Arredondo saw the regulator struggle with major outside pressures. First, Brexit forced a major overhaul of the regulatory framework so it could operate independently from the European Union. Then the COVID-19 pandemic shifted attention to crisis response, like supporting banks and managing loans. Those back-to-back priorities meant crypto, which was originally a side issue, got less focus inside the organization.

On top of that, the fallout from major investment failures, like London Capital & Finance and the Woodford Fund, led to a stronger focus on consumer protection. Under CEO Nikhil Rathi, crypto was increasingly viewed through that lens, which made regulation more complicated.

Two Tracks in Crypto Regulation

Arredondo sees a split in the FCA's approach: a proactive stance toward large financial institutions and a more cautious, bureaucratic approach for startups and retail-focused crypto companies. While institutional players benefit from initiatives like the Digital Securities Sandbox and tokenization partnerships, smaller firms deal with long approval processes and repeated reviews.

Unlike the European MiCA rules, which were built specifically for crypto, the U.K. keeps trying to fit crypto activity into existing frameworks. That creates delays and frustration across the industry, especially given the Bank of England's cautious stance on stablecoins. For example, a recent proposal to cap stablecoin holdings was pulled back in favor of a macroprudential limit on the total circulation of systemic stablecoins.

Still, Arredondo says following U.K. rules can pay off in the long run. Well-regulated companies build institutional trust and can end up in a stronger position to grow.

Collaboration and Interoperability as the Next Step

At Hedera, Arredondo focuses on the broader challenges around digital currencies. She points to the lack of a coordinated approach to interoperability between different blockchain networks, stablecoins, and digital money projects. In her view, the market needs standards that make collaboration possible, instead of each player building its own separate solution.

That matters even more now that governments, banks, and companies are experimenting with tokenized deposits, stablecoins, and central bank digital currencies (CBDCs). Arredondo sees the European Union as a model, where different forms of digital money can exist side by side under one framework. That lines up with the broader European shift toward a digital euro, for which parliament recently approved an important framework.

Why This Matters for European Crypto Developments

Arredondo's experience and insights offer useful context for European crypto readers. The U.K. situation shows how policy ambitions can clash with operational reality, and that can matter in other jurisdictions too. Her push for interoperability and harmonized standards also highlights how important collaboration is across the European crypto market, especially as digital currencies become more integrated into the mainstream financial system.