Inside the FCA's Two-Track Crypto Operation: Institutions Get Fast Lane, Startups Wait

Isadora Arredondo spent four years inside the UK Financial Conduct Authority writing crypto policy through Brexit and COVID. She says the gap between the government's crypto hub ambition and what actually lands on firms' desks is the real bottleneck, not hostility to digital assets.

"I had never encountered first-hand the world that separates policy ambition from policy execution," Arredondo told CoinDesk. "There is a great divide between the ambition to drive policy and how it is actually implemented."

The Split Track: Institutional Sandbox vs. Startup Slog

Arredondo argues the FCA runs two parallel crypto programs. On the wholesale side, the Digital Securities Sandbox is proactive and hands-on. Major financial institutions exploring tokenization get direct engagement from the regulator. "When it comes to institutional engagement with crypto, they are quite forward-looking, proactive, and hands-on," she said.

For startups and retail-facing firms, the picture flips. Instead of a dedicated framework like the EU's MiCA, the UK tries to squeeze crypto into legacy financial rules. That means multi-team authorization processes with repeated reviews. Crypto firms have publicly blamed these delays for making the UK a tough place to build.

Arredondo points to competing priorities as the cause. First Brexit forced the FCA to rewrite its entire rulebook. Then COVID hit, shifting focus to crisis loans and forbearance. After that, the Woodford Fund and London Capital & Finance blowups pushed the regulator into consumer-protection hyperdrive. Crypto was seen through that lens under CEO Nikhil Rathi. The result: a system that worked for Goldman but left Coinbase-style firms waiting years.

The Stablecoin Cap Reveals the Real Agenda

The Bank of England just dropped its new stablecoin rules, rolling back proposed per-user limits in favor of a macro cap: 40 billion pounds ($50.6B) total circulation for any single systemic stablecoin. That's a concrete number that tells you the central bank is thinking about systemic risk at scale, not about enabling retail payments. The Financial Times reported that businesses calling for fast integration are hitting a "massive regulatory bottleneck."

Arredondo defends the UK's standards, noting that firms who survive the process gain real institutional credibility. UK regulations come into effect October 2027. That timeline is an eternity in crypto, but Arredondo says it reflects the gap: policy ambition has no off-ramp to execution speed.

Why Interoperability Beats Another Blockchain

Now at Hedera, Arredondo spends her time on digital money policy across governments and central banks. Her worry isn't the technology - it's the lack of coordination. "We have sophisticated solutions to many problems, but we don't yet have a coordinated effort on interoperability," she said. The industry has spent years building separate blockchains, stablecoins, and CBDCs without ensuring they talk to each other.

She wants to shift the market from "everyone doing their own very cool things" to actual standard-setting across the piece. That's the only way the UK's ambition - or any country's - moves from a policy document to a working financial system.

Source: Ex-FCA policy insider explains the 'great divide' in the UK's crypto ambition
Domain: coindesk.com