06-05-2025 
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The United Kingdom’s Financial Conduct Authority (FCA) is ramping up its efforts to prepare a regulatory framework for digital assets. In what it described as “the latest milestone on the road to crypto regulation,” the regulator has requested public feedback on proposed regulations for stablecoins and digital asset custody.
On May 28, the FCA—the U.K.’s top finance sector regulator—published two consultation papers, one on ‘stablecoin issuance and cryptoasset custody,’ and the other on ‘a prudential regime for cryptoasset firms.’
The consultations outline and seek feedback on draft rules for the issuance of stablecoins, safeguarding customer assets, and improving the financial resilience of firms operating in the digital asset space.
This follows the April publication by HM Treasury of high-level draft regulations for crypto assets and stablecoins, the so-called “future financial services regulatory regime for cryptoassets,” which delegated detailed rulemaking authority to the FCA – except for systemic stablecoins, which fall under the Bank of England’s (BoE) purview. It also outlined several high-level digital asset activities that would bring an entity within U.K. regulation, placing foreign issuers of stablecoins outside this scope.
The FCA’s latest draft rules, outlined in the consultations published on Wednesday, are based on prior roundtables and industry feedback.
The regulator said that the consultation paper on stablecoin issuance and cryptoasset custody aims to ensure regulated stablecoins maintain their value and that customers are provided with clear information on how the backing assets are managed. Meanwhile, the consultation paper on a prudential regime for cryptoasset firms seeks to establish rules to develop a safe, competitive, and sustainable digital asset sector.
“At the FCA, we have long supported innovation that benefits consumers and markets. At present, crypto is largely unregulated in the U.K.,” said David Geale, executive director of payments and digital finance at the FCA. “We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”
The FCA also noted it would be working with the BoE to “ensure a clear pathway in regulation for stablecoins.” BoE Deputy Governor Sarah Breeden commented on the announcement, saying that “for those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year.”
In terms of the FCA’s consultations, in order to ensure stablecoins remain ‘stable,’ the regulator proposed several notable requirements and recommendations.Ensuring stability
On reserves, the FCA recommended that stablecoin issuers appoint independent third-party custodians to hold reserve assets, and proposed a minimum on-demand deposit requirement (ODDR)—money deposited in a bank account that can be withdrawn at any time without advance notice—of 5%, to avoid over-reliance on immediate access to the markets.
Other key proposals included that stablecoin issuers are not allowed to pay holders interest and are required to keep the assets segregated in a statutory trust, and any stablecoin holder can request direct redemption of any amount, which should be actioned by the end of the following working day.
Custody and capital
On the digital asset custody side of things, the FCA proposed requirements designed to ensure that user assets are secure and can be accessed at any time. Specifically, firms should have “sound administrative and accounting procedures supported by robust internal controls.”
Another requirement was that firms hold an amount of liquid assets at least equal to the sum of one third of the amount of its fixed overheads requirement, and 1.6% of the total amount of any guarantees provided to clients.
The FCA also proposed a permanent minimum capital requirement for issuers of qualifying stablecoin and for qualifying cryptoasset custodians, to be set at £350,000 (around $471,500) for the former and £150,000 (around $202,000) for the latter.
Licensing
Under the new regime set out in the consultations, stablecoin issuers and cryptoasset custodians will need to be authorized by the FCA under the Financial Services and Markets Act 2000 and, once authorized, will continue to be subject to ongoing FCA supervision.
The FCA said it intends to apply “the same regulatory approach to qualifying stablecoin issuers and qualifying cryptoasset custodians and associated individuals as we do to other regulated firms.”
The deadline for feedback on the consultations is July 31, 2025. The FCA said it aims to publish the final rules in 2026.
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