The full impact of Brexit on financial services started to sink in at some point in late 2020. On December 31 of that year, the transition period came to an end, and the passport—which the fintech and cryptocurrency sectors had secretly relied on for years—went away. A London-based startup was able to operate in 27 EU member states without having to submit a separate application in each thanks to that one word: passport. When it vanished, the environment changed in ways that were immediate for some businesses and still developing for others.
The cryptocurrency industry had greatly profited from being close to London’s financial reputation, which had been established over many years. A UK regulatory relationship was important for blockchain companies trying to persuade enterprise clients to trust them because the FCA was respected in a way that regulators in smaller jurisdictions just weren’t. It carried weight to enter a boardroom in Amsterdam or Frankfurt with FCA oversight behind you. This benefit did not immediately disappear, but it became more difficult to use in the absence of the EU market access that had previously accompanied it.
Smaller businesses were most severely impacted by the passporting loss. The expense and administrative strain of obtaining authorizations in each of the EU’s member states could be borne by a business like Circle, which had already obtained an e-money license and built banking connections in the UK. A twelve-person startup with an eighteen-month runway could not. After 2020, several promising UK-based cryptocurrency companies might have just decided to relocate their headquarters to Dublin, Luxembourg, or Amsterdam instead of navigating a process that had grown more costly and time-consuming. Although there isn’t a clear statistic for the businesses that never selected London, you can see the shape of that absence if you look.
The more intriguing aspect of the story is what the UK decided to do with its newly acquired regulatory independence. British policymakers chose to create something different instead of completely adopting the EU’s Markets in Crypto-Assets framework, which would have been the easiest route. It’s difficult to say whether that represents a true strategic vision or a desire to stand out from Europe; it’s likely a combination of the two. As a result, a phased, UK-specific regulation that covers everything from stablecoin issuance to trading platforms to the protection of client assets will mandate that all cryptocurrency companies engaged in in-scope activities have FCA authorization by October 2027.
The timeline is more constrained than it might seem on paper. In July 2026, firms can use the FCA’s PASS service to request pre-application meetings. Two months later, in September, the official application window will open. For a sector that has traditionally advanced more quickly than regulators and is now learning what it’s like to work the other way around, that is not a long runway. Some in the industry believe that the FCA is sincerely attempting to make this shift feasible after learning from its previous, more combative relationship with cryptocurrency (the derivatives ban in 2021 caused significant harm). It’s still unclear if the experience aligns with the intention.
In the end, Brexit produced more than just a win-or-loss column for UK cryptocurrency. There was real conflict as a result of the loss of passporting, and some talent and investment were probably diverted to EU countries. The benefit is a regulatory framework that the UK can modify without waiting for agreement in Brussels, at least in theory. That flexibility is extremely valuable in an industry that is changing as fast as digital assets. However, it’s difficult to ignore the fact that, even after six years, the UK is still constructing the system that was meant to support the trade. The architecture is beginning to take shape. For now, it’s unclear if it will be worth what was sacrificed.
