FCA Seeks Feedback on Stablecoin & Crypto Custody Rules

The Financial Conduct Authority (FCA) has released a pivotal consultation paper outlining regulatory proposals for the issuance of stablecoins, cryptoasset custody, and the financial resilience of firms operating in the UK’s fast-evolving crypto landscape. This move marks the next phase in the UK’s journey towards a secure and innovation-driven regulatory regime for digital assets.

A Strategic Step Towards Crypto Regulation

Building on extensive engagement through industry roundtables and previous discussion papers, the FCA’s proposals aim to create a robust framework for regulating stablecoins—cryptoassets that seek to maintain a stable value by referencing fiat currencies such as sterling or the euro.

These stablecoins are increasingly seen as key to unlocking efficiencies in blockchain-powered payment and settlement systems, especially for cross-border transactions. The FCA’s proposed rules are designed to ensure that regulated stablecoins genuinely maintain their value and are backed by transparent and verifiable reserves. Consumers would also benefit from improved disclosures about how their funds are managed and safeguarded.

Fostering Innovation & Market Integrity

David Geale, executive director for payments and digital finance at the FCA, underscored the regulator’s dual commitment to innovation and stability:

At the FCA, we have long supported innovation that benefits consumers and markets. At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.

To support this goal, the FCA will consider expanding its innovation services to include dedicated support for stablecoin-related projects in the coming months, encouraging responsible growth in this promising corner of the digital asset market.

Coordinated Approach with the Bank of England

Recognising the systemic potential of certain stablecoins, the FCA is working closely with the Bank of England to ensure a coherent and complementary regulatory approach. Sarah Breeden, deputy governor for financial stability at the Bank of England, confirmed a forthcoming consultation paper addressing systemic stablecoins and issues such as allowing limited returns 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.

Strengthening Crypto Custody & Firm Resilience

The FCA is also proposing new rules for crypto custody providers; firms responsible for safeguarding consumers’ digital assets. These rules are intended to ensure assets are held securely, remain accessible, and that firms are operationally resilient. In line with broader objectives, the proposals seek to reduce the risk and impact of firm failure across all regulated entities involved in stablecoin issuance and custody.

This initiative follows HM Treasury’s draft legislation from April 2025, laying the groundwork for a comprehensive UK crypto regulatory framework.

Next Steps & Industry Participation

The FCA is inviting feedback on its proposals by 31 July 2025, ahead of publishing final rules in 2026. Industry stakeholders, innovators, and financial institutions are encouraged to participate in shaping a regime that protects consumers while nurturing the UK’s position as a global hub for digital financial services.

Read the press release here.