FCA Sets Out Its Proposed Regulation of Stablecoins and the Prudential Regulation of Crypto Asset Firms

The UK’s Financial Conduct Authority (FCA) published in June 2025 two consultations: CP25/14 on stablecoin issuance and crypto asset custody and CP25/15 on prudential requirements for crypto asset firms.

The consultations are part of the FCA’s published roadmap which sets out the plan for FCA policy publications for crypto assets where it is seeking feedback until 2026. The consultations close on July 31, 2025.

CP 25/14 – “Stablecoin issuance and crypto asset custody”

In CP 25/14, the FCA sets out proposed rules for the activities of issuing a qualifying stablecoin and safeguarding qualifying crypto assets, including qualifying stablecoins. These activities will be introduced as new regulated activities through amendments to the Regulated Activities Order, requiring FCA authorisation to carry them out.

Key features of the FCA’s proposals for issuers of qualifying stablecoins include requirements that qualifying stablecoins are fully backed at all times and that the redemption of qualifying stablecoins is guaranteed by the issuer at par, subject to specific exemptions.

Under the proposed rules the backing asset pool of a stablecoin must be composed of assets that are low risk, secure and sufficiently liquid. The FCA’s proposals provide that all stablecoin issuers should hold a minimum proportion of on-demand bank deposits as part of their backing pool. Furthermore, the FCA proposes that backing assets are held in a statutory trust for the benefit of qualifying stablecoin holders and that an issuer must appoint third parties which are unconnected to the issuer, or any of the issuer’s group, to safeguard backing assets.

The FCA believes that it is important that qualifying stablecoins are treated as a money-like instrument and not as investments. So, it believes that stablecoin issuers should retain but not pass down interest or other benefits from the backing asset pool directly or indirectly to consumers.

The FCA proposes that stablecoin issuers may use third parties to carry out elements of the issuance activity. However, the issuer would remain responsible for complying with regulatory requirements and be liable if something were to go wrong when a third party is acting on its behalf.

In relation to crypto asset custodians, the FCA proposes rules to ensure adequate protection of clients’ crypto assets and that those assets are returned as quickly and wholly as possible to clients if a qualifying crypto asset custodian enters an insolvency process.

The FCA is in favor of the use of both individually segregated and omnibus wallets to safeguard clients’ qualifying crypto assets. As the FCA has identified challenges in evidencing ownership rights for crypto assets, it proposes that clients’ qualifying crypto assets are held in trust to better protect clients’ rights to their assets, in the event of a custodian insolvency.

CP 25/15 – “A prudential regime for crypto asset firms”

In CP 25/15, the FCA seeks views on its proposed prudential rules for firms which offer crypto asset services. The FCA believes that clear prudential rules for such firms will reduce regulatory uncertainty, encouraging firms to set up in the UK.

The FCA’s long term plan is to establish an integrated prudential sourcebook (COREPRU) which integrates core prudential requirements common across different types of firms. This will then be supplemented by sector specific sourcebooks, such as CRYPTOPRU, that will build on the common requirements for firms offering crypto asset services.

CP 25/15 proposes to include in CRYPTOPRU:

• A permanent minimum capital requirement for issuers of qualifying stablecoin of £350,000 and for qualifying crypto asset custodians (£150,000)
• K-factors that will apply to issuers of qualifying stablecoin and qualifying crypto asset custodians

It is also proposed that a fixed overhead requirement will also apply to firms offering crypto asset services.

The two new K-factors proposed to provide against relevant operational risks are:

• A K-factor for qualifying stablecoin in issuance (K-SII)
• A K-factor for qualifying crypto assets safeguarded (K-QCS)

The FCA proposes that K-SII would be measured and calculated as 2% of the average qualifying stablecoin in issuance (SII) and K-QCS as 0.04% of a crypto asset custodian’s average qualifying crypto assets safeguarded (QCS).

Consistent with MIFID investment firms, it is proposed that CRYPTOPRU firms will hold an amount of liquid assets that are at least equal to the sum of one-third of the amount of their fixed overheads requirement, and 1.6% of the total amount of guarantees provided to clients.

The FCA is also proposing a separate liquid asset requirement for stablecoin issuers to provide for the price risk in stablecoin backing asset pools. The methodology draws upon the approach to the Liquidity Coverage Ratio with a view to ensuring that there is sufficient liquidity coverage for stablecoin redemptions.

Firms will be required to monitor and control all their relevant sources of concentration risk to manage the potential for harm from different types of concentrated exposures or relationships.

Conclusion

Once a custodial regime is in place, this should facilitate growth in the crypto asset market as investors gain confidence in the protection of their assets in the UK. The proposed prudential regulation should also increase investor confidence in crypto asset firms in the UK, stimulating future growth in this market.