UK FCA Proposes New Stablecoin and Crypto Custody Regulations

The regulatory proposals are significant as they could reshape the crypto landscape in the UK, impacting stablecoin issuers and custody providers directly.

The UK’s FCA and Bank of England have proposed new regulations focusing on stablecoins and crypto custody. Key institutions involved include the FCA, Bank of England, and HM Treasury. Their initiative aims to ensure asset security and financial stability.

The FCA released two consultation papers aimed at industry feedback on these regulatory changes. Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, emphasized the importance of a systemic scale operation for regulated stablecoins and noted, “We welcome the proposals the FCA have published as part of building the UK’s stablecoin regime. For those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year, including responding to industry feedback around allowing some return on backing assets. We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime, including how firms transition within the regime.”

Immediate effects include stricter security requirements for crypto custody. Regulated stablecoins such as USDT and USDC, if operating within the UK, face new regulations. These changes seek to bolster consumer protection and reduce systemic risk.

The financial, political, and social implications are significant, as stablecoin issuers and custody firms must adhere to new standards. The rules aim to foster trust in the market while preserving innovation.

Industry experts anticipate these proposals to set a precedent for international regulatory frameworks. The FCA seeks industry input by July 31, 2025, with final rules anticipated in 2026. Feedback will play a crucial role in shaping these regulatory measures.