Former FCA Insider Says UK’s Crypto Ambition Faces a ‘Great Divide’

What to Know

• Isadora Arredondo, a former Financial Conduct Authority policymaker now at Hedera, says the U.K.’s crypto challenge is a gap between policy ambition and practical execution.
• She argues Britain has advanced faster on institutional and wholesale crypto than on startup and retail-focused firms.
• According to Arredondo, many smaller firms still face lengthy authorization processes under legacy rules instead of a dedicated crypto framework.
• She says the U.K. is pursuing a split approach, unlike the European Union’s MiCA regime, which aims to provide a more unified crypto rulebook.
• Arredondo believes the future of digital money will depend on interoperability and common standards across blockchains, stablecoins and central bank digital currencies.
• She views the growing presence of major financial institutions in crypto as evidence that the sector’s core ideas are being absorbed into mainstream finance.

Policy ambition is not the same as delivery

The United Kingdom has spent years positioning itself as a potential global crypto hub, but a former Financial Conduct Authority official says the country’s biggest obstacle is not outright hostility to digital assets. Instead, the issue is a widening gap between what policymakers want to achieve and how regulation is applied in practice.

Isadora Arredondo, now global policy vice president at Hedera and formerly a U.K. FCA policymaker, says Britain’s approach has been slowed by competing regulatory priorities. In her view, the debate has often focused too much on whether the U.K. supports crypto at all, when the more important question is whether the system can actually deliver a workable framework for businesses.

That distinction matters because the U.K. has continued to talk up digital asset innovation, yet many firms still encounter a slow-moving and fragmented authorization environment. Arredondo’s comments suggest that the country’s challenge is structural rather than ideological.

A split approach to crypto regulation

Arredondo describes the U.K. as taking a divided path. On one side, authorities have moved relatively quickly on institutional and wholesale crypto activity. On the other, startups and retail-oriented firms remain subject to lengthy approvals and compliance expectations that were largely built for legacy financial services.

This has created what she sees as a two-speed market. Larger financial institutions, with more resources and established compliance teams, are better placed to navigate the current system. Smaller firms, by contrast, can face delays that make it harder to launch products, attract investment or scale operations in the U.K.

In Arredondo’s view, this imbalance is not simply a technical issue. It risks shaping the type of crypto ecosystem that develops in Britain. If the fastest route to market is only available to the largest players, innovation could become concentrated in a narrow part of the industry rather than spread across the broader startup landscape.

Why MiCA matters in the comparison

Arredondo contrasted the U.K.’s approach with the European Union’s Markets in Crypto Assets framework, known as MiCA. While MiCA is not without its own implementation challenges, it provides a dedicated regulatory structure for crypto businesses rather than forcing them to fit entirely within older rules designed for traditional finance.

That difference is significant. A bespoke framework can give firms greater clarity about what is required, how products are treated and which activities are permitted. It can also reduce uncertainty for investors and companies deciding where to build. By comparison, a patchwork approach based on legacy regulation may leave room for interpretation, delay and inconsistent treatment.

Arredondo’s point is not that the U.K. lacks ambition. Rather, she suggests the country has yet to align its policy goals with the legal and operational machinery needed to support them. For a sector that moves quickly and depends on regulatory certainty, that gap can be decisive.

Interoperability is emerging as the next battleground

Beyond the immediate policy debate, Arredondo argues that the next phase of digital money will be defined by interoperability. She believes the industry will increasingly depend on common standards that allow blockchains, stablecoins and central bank digital currencies to work together more effectively.

This matters because digital finance is becoming more interconnected. Stablecoins are increasingly used as settlement tools, tokenization projects are moving across financial markets and central banks continue to explore the design of digital currencies. If these systems remain isolated from one another, their usefulness will be limited. If they can interact through shared standards, their adoption could accelerate.

Arredondo’s comments point to a broader shift in how crypto is being understood inside traditional finance. The core ideas that once looked disruptive or separate from mainstream markets are now increasingly being studied, adopted and integrated by major institutions. For her, that is evidence of maturation rather than decline.

Traditional finance is absorbing crypto’s core ideas

The growing role of large banks and established financial institutions in digital assets also supports her wider argument. Instead of treating crypto as a fringe phenomenon, major firms are increasingly building products, infrastructure and internal expertise around it.

That evolution suggests the industry is entering a new stage. Early narratives often framed crypto as a challenger to the financial system. Today, much of the momentum is coming from the way traditional finance is incorporating blockchain-based tools, tokenized assets and digital settlement mechanisms into existing business models.

Arredondo appears to view this as a positive sign. In her assessment, the underlying ideas behind crypto are not being abandoned. They are being absorbed into the financial mainstream, where they may have a greater long-term impact than they did as a purely outsider movement.

What it means for the U.K. going forward

For the U.K., the message is clear: ambition alone will not make the country a leader in digital assets. Firms need predictable regulation, faster authorization pathways and a framework that reflects the realities of modern crypto markets rather than relying too heavily on older financial rules.

If policymakers want the U.K. to compete with jurisdictions that offer clearer digital asset regimes, they may need to close the distance between high-level strategy and day-to-day supervision. That will likely involve balancing consumer protection, market integrity and innovation in a way that does not leave smaller firms behind.

Arredondo’s critique is ultimately a warning and an opportunity. The warning is that the U.K. could lose momentum if its regulatory process remains fragmented. The opportunity is that a more coherent framework could still position Britain as a serious destination for crypto businesses, institutional capital and next-generation financial infrastructure.

Frequently Asked Questions (FAQs)

Who is Isadora Arredondo?

Isadora Arredondo is a former U.K. Financial Conduct Authority policymaker who now serves as global policy vice president at Hedera.

What is her main criticism of the U.K.’s crypto strategy?

She says the main problem is not hostility to crypto, but a gap between policy ambitions and how rules are actually implemented.

Why does she say the U.K. has a split approach?

Arredondo argues that the U.K. has moved faster on institutional and wholesale crypto, while startups and retail firms face slower, more complex approval processes.

How does the U.K. compare with MiCA?

She says the European Union’s MiCA framework gives crypto firms a more dedicated rulebook, while the U.K. still relies heavily on legacy regulation.

Why is interoperability important?

Interoperability would help blockchains, stablecoins and CBDCs work together, which Arredondo sees as essential for the next stage of digital money.

What role are major banks playing in crypto?

According to Arredondo, large financial institutions are increasingly adopting crypto-related tools, showing that the sector is being absorbed into mainstream finance.

Does Arredondo think the U.K. has abandoned its crypto ambitions?

No. She believes the U.K. still has strong ambitions, but its progress is being slowed by execution problems and competing priorities.

What does this mean for crypto startups?

Startups may continue to face delays and uncertainty unless the U.K. develops a clearer and more tailored regulatory framework.

Why does this story matter to investors?

Regulatory clarity can influence where companies build, where capital flows and which markets become leading crypto hubs.

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