Why UK Crypto Down: Liquidations and Regulation Weigh on Adoption

The UK’s crypto market is sending mixed signals. While Bitcoin’s surge to $126,251 in early 2025 sparked optimism, the actual number of crypto holders dropped for the first time since 2021. Adult crypto adoption slipped from 12% last year to approximately 8% in 2025—a notable retreat despite industry efforts to push expansion.

Data from the Financial Conduct Authority (FCA) reveals that around 7 million UK adults held digital assets in 2024, representing growth from 10% in 2022. But this year’s decline reflects deeper challenges: massive forced liquidations and extended market downturns have eroded retail confidence. General crypto awareness remains solid at 91%, yet awareness hasn’t translated into ownership.

Where the Money Moved: Holding Patterns Shift

Interestingly, those who stayed in crypto are doubling down. Roughly 21% of active holders now maintain positions between £1,001 and £5,000, while accounts under £100 have shrunk significantly. This suggests a market bifurcation—retail liquidations pushing smaller players out, while committed investors consolidate larger stakes.

FCA officials noted that despite lower participation rates, “the typical value held by investors has increased.” Investors are making bigger bets, conducting more research, and demonstrating stronger risk awareness than the casual holders who exited.

Regulatory Blueprint Taking Shape for 2026-2027

The FCA has shifted focus from market size to market structure. A new consultation package covers staking, decentralized finance, exchange services, and market abuse prevention. License applications open in 2026, with comprehensive rules rolling out in 2027.

One proposal previously targeted retail lending and borrowing restrictions, but regulators reversed course after discovering these services attract sophisticated users with larger holdings and better risk literacy. The regulatory window for public feedback runs through February 2026.

Political Dollars Flow Into Crypto

Beyond compliance, crypto’s political influence is accelerating. Reform UK has become a focus point for industry lobbying, with strategists betting on friendlier policy outcomes. Christopher Harborne’s donation to Reform represented the largest single contribution ever made to a British political party by a living donor.

This contrasts sharply with the EU and US, which have already implemented digital asset regulations. Britain’s lag in regulatory clarity may be attracting political capital rather than market growth—a reversal of the typical relationship between regulation and adoption.