Ex-FCA Voice Highlights Deep Divide in the UK’s Approach to Crypto Growth

Former FCA policymaker and Hedera Global Policy VP Isadora Arredondo says the UK’s crypto push is being slowed by a persistent disconnect between policy ambition and how regulation is actually implemented.

With experience inside the UK Financial Conduct Authority (FCA) during Brexit-era reforms and later crypto rulemaking, she offers an insider view of how regulatory intent often gets diluted in execution.

In her view, the UK’s challenge in becoming a global crypto hub is less about lacking direction and more about the difficulty of turning strategy into consistent regulatory delivery.

Speaking to CoinDesk in London, Arredondo said she had not fully appreciated “the world that separates policy ambition from policy execution,” calling it a “great divide” between what regulators aim for and what is ultimately enforced in practice.

The interview came shortly before the Bank of England updated its stablecoin framework, replacing earlier proposals that would have capped individual holdings with a system-wide limit of £40 billion ($50.6 billion) per stablecoin.

UK crypto regulation: ambition vs reality

Arredondo traces the current regulatory approach back to her time at the FCA between 2018 and 2021, a period shaped by major political and economic disruption.

She rejects the idea that the regulator is inherently hostile to crypto, arguing instead that external crises and shifting priorities slowed progress significantly.

Brexit required a full overhaul of financial rulemaking, and the COVID-19 pandemic pushed the FCA into crisis-management mode focused on liquidity support and financial stability.

During that phase, crypto was deprioritized as attention shifted to emergency financial measures.

Later, scandals such as the collapse of London Capital & Finance and the Woodford Fund reinforced a stronger consumer protection stance.

These developments collectively pushed crypto regulation into a more cautious, risk-first framework.

Two-tier regulatory approach

Arredondo describes the FCA’s approach to crypto as effectively split into two tracks.

Large institutions often benefit from structured engagement, including initiatives like the Digital Securities Sandbox and experimentation with tokenized financial instruments.

Smaller crypto firms, by contrast, tend to face slower approvals and more complex, multi-layered reviews.

Unlike the EU’s MiCA regime, which created a dedicated crypto framework, the UK has largely tried to fit digital assets into existing financial regulation.

According to Arredondo, this leads to longer approval timelines and repeated assessments across different regulatory teams.

While acknowledging frustration from industry players, she argues the UK’s stricter standards ultimately strengthen trust and institutional credibility.

Full implementation of the UK’s crypto regime is expected in October 2027.

Interoperability: the next major hurdle

Now at Hedera, Arredondo focuses on how governments and central banks are shaping digital money systems.

She says the core challenge is not technological capability but the lack of interoperability between competing systems.

Despite rapid growth in blockchains, stablecoins, and tokenized assets, she argues these remain largely siloed ecosystems.

Rather than fragmented innovation, she calls for shared standards that allow different systems to connect and function together.

This issue is becoming more urgent as policymakers explore stablecoins, tokenized deposits, and central bank digital currencies in parallel.

She points to the European Union as an example of a jurisdiction trying to accommodate multiple forms of digital money within a unified framework.

Institutional adoption and shifting perspectives

The growing presence of banks and major financial institutions in crypto has sparked debate over whether the industry is drifting away from its original decentralization ethos.

Arredondo rejects that view.

She argues that institutional adoption reflects the mainstream absorption of ideas originally developed within crypto rather than a departure from them.

In her view, early crypto innovation helped surface fundamental questions about money and financial systems that are now being integrated into traditional finance.

Rather than a compromise, she sees this evolution as evidence that digital asset principles are becoming embedded in the global financial system.