Zeeshan Uppal is COO and Compliance Director at Relm.
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As crypto adoption rates continue to grow, cementing it as a mainstream financial services product, regulation is often portrayed as a top-down process, with government agencies setting the pace and the rules. But in reality, much of the momentum is coming from elsewhere: namely, larger financial institutions and established fintechs looking to capitalise on working with regulators to help shape frameworks to ensure business continuity. Their push for clarity and security in crypto markets is accelerating the development of frameworks that could unlock adoption at scale. The risk, however, is that these frameworks end up serving the needs of the largest players, while making it harder for smaller innovators to thrive. Reducing innovation and the evolution our industry is capable of.
This tension between established players and innovators; between growth and compliance; is at the heart of how the future of digital assets will be shaped.
Pressure from the top
Large financial institutions are pressuring regulators. Not out of choice, but out of necessity. Without regulatory alignment, their ambitions for crypto ETFs, custody solutions and other mainstream financial products simply cannot move forward. At the same time, crypto-native firms are pushing for adoption that can only be achieved through regulatory legitimacy. In short, both sides know that regulation is the gateway to growth.
We’ve already seen frameworks such as the EU’s Market in Crypto Assets (MiCA) Regulation bring immediate market consequences, from reshaping reporting standards to forcing exchanges to delist certain stablecoins. In Dubai, new rules from VARA this year have slowed down the application process, such as the need for strengthened supervisory mechanisms, enhanced protection for client assets, and stricter controls for margin trading and token distribution. This required firms to adapt mid-stream. These examples show how quickly regulation impacts business realities, and why alignment between industry and regulator is no longer optional.
The innovation squeeze
Yet here lies the risk: regulation shaped primarily by large organisations, with the ability to influence regulators at scale will create a model designed for institutions with deep compliance departments and significant resources to thrive. But what about regulation that encourages a more diverse system, made up by a broad range of businesses? Growing businesses are often the source of the most meaningful innovation, simply cannot meet the same operational requirements without disproportionate cost.
This is not a new story. Fintech innovators have always faced the challenge of the “regulatory boom” designed with banks in mind. The danger in digital assets is that we replicate the same model, creating high barriers that protect the system’s integrity, but also stifle the very growth regulators are trying to foster.
What’s needed is nuanced - high standards, but proportionate ones. Requirements should scale with the size and risk profile of the business, not force lean innovators to meet the same burdens as global banks. If it is done well, regulation can encourage quality while still leaving space for creativity. Alternatively, it will choke out competition and concentrate power in the hands of a few.
Why compliance-first matters
The narrative around digital assets often focuses on disruption and rightly so, the industry is full of brilliant innovations and change-filled options. But disruption without compliance is unsustainable. If digital assets are to gain trust and achieve broad adoption, compliance-first infrastructure is not optional. It is the only foundation on which our industry can scale.
That is why firms like ours are pursuing a “reg first, compliance first” approach, even when it slows progress. Building relationships with regulators and banking partners - ensuring our infrastructure meets the requirements of both worlds - is how we bridge the divide between traditional finance and Web3. It is slower, yes, but it is more importantly sustainable.
The UK’s moment of opportunity
The UK is at a crossroads in this story. The FCA has provided a crypto roadmap whereby it anticipates releasing new policy statements for the FSMA regime to go live in 2026 - prompting some firms to wait for this, rather than pursue existing MLR pathways. On the surface, this feels like a setback, particularly as Europe moves ahead with MiCA and the US tests new models through the Genius Act.
But there is an advantage to caution. By learning from the challenges and unintended consequences seen elsewhere, the UK has the chance to create a regulatory framework that is both sustainable and globally competitive. If the UK strikes the right balance, it could position itself as a hub for digital assets. If it overcorrects, it risks being left behind.
Striking the balance
If I could give regulators one suggestion, it would be this: adopt a genuine risk-based approach. Regulation should not be about policing every transaction; it should be about ensuring businesses operate responsibly while leaving space for innovation to flourish.
The future of digital assets will be defined not only by technology but by the regulatory choices made today. If established players, innovators, and policymakers can find common ground, we have the opportunity to build a market that is secure, trusted, and globally competitive. But if we allow the balance to tip too far in the other direction, we risk entrenching old models at the expense of new ones. Digital assets have always been a disruptor, but with the right regulation, it can also be a builder.
