How New UK Rules Will Change the Way Law Firms Look at Cryptocurrency in Money-Laundering Checks

Cryptocurrency has often been treated with caution by law firms because it has, until now, sat largely outside the UK’s main financial regulatory system. Many firms have viewed it as high risk by default, mainly because of concerns about anonymity, fraud, and the difficulty of tracing where money comes from. That position is now starting to change.

In December 2025, the UK government and the Financial Conduct Authority (FCA) published proposals that would bring large parts of the cryptocurrency market into a formal regulatory framework. In simple terms, this means that many businesses dealing with cryptocurrency will, for the first time, be regulated in a similar way to other financial services firms. This marks a significant shift in how cryptocurrency is treated under UK law.

For law firms, this matters because anti-money laundering checks are based on risk. Until now, cryptocurrency has usually been seen as risky because there was very little official oversight. Under the new proposals, some cryptocurrency activities will require FCA approval, ongoing supervision, and compliance with detailed rules. As a result, law firms will no longer be able to treat all cryptocurrency involvement as the same. Instead, they will need to distinguish between regulated UK-based activity and unregulated or overseas activity.

One practical change is that law firms will be able to place more weight on whether a cryptocurrency business is authorised by the FCA. If a client is using a regulated UK cryptocurrency firm, that may reduce the overall risk rating compared to dealing with an unregulated provider. This does not remove the need for careful checks, but it does provide a clearer benchmark for assessing risk.

The new rules also aim to improve transparency. Businesses offering certain cryptocurrencies to the public will be required to publish clear information explaining how the asset works, who is behind it, and what the risks are. For law firms, this should make it easier to understand the background to a transaction and to assess where funds are coming from, rather than relying solely on limited or informal information.

In addition, the FCA is proposing rules to reduce fraud and market manipulation in cryptocurrency markets. This includes requirements for trading platforms to monitor suspicious activity and prevent abusive behaviour. While these rules are not aimed directly at law firms, they are relevant because financial crime risks often overlap. A market with stronger controls is generally less attractive to criminals.

The proposals also introduce financial stability requirements for regulated cryptocurrency businesses, such as minimum capital and risk management standards. This is important from an anti-money laundering perspective because poorly run or under-funded firms are more likely to collapse or be misused for criminal purposes. Law firms may therefore begin to take a client’s regulatory and financial standing into account when assessing risk.

Importantly, none of this means that cryptocurrency becomes “low risk”. It will still require careful consideration, enhanced checks in many cases, and senior oversight. However, the new regime allows law firms to move away from blanket assumptions and towards a more balanced, evidence-based approach.

In summary, the UK’s proposed cryptocurrency regulations are likely to change how law firms assess money-laundering risk. Instead of viewing all cryptocurrency as equally risky, firms will be expected to look at who is involved, whether they are regulated, how transparent the transaction is, and where the activity sits within the new legal framework. This represents a move towards clearer, more proportionate risk assessments, rather than automatic refusal or excessive caution.