UK Crypto Rules: New Plans for Stablecoins and Custody

The Financial Conduct Authority (FCA), the UK’s financial regulator, is preparing to introduce sweeping new regulations for companies involved in stablecoins and digital asset custody. A draft regulatory package, released for public consultation in May 2025, is set to redefine how firms issue and safeguard crypto-linked products.

While the final guidance remains under review, the FCA is expected to publish a policy statement by late summer 2026, with full regulations coming into force in October 2027. The rules target two critical areas:

1. Stablecoin Issuance: Full Asset Backing with Unwavering Transparency

Firms issuing fiat-referenced stablecoins must adhere to stringent asset backing requirements:

• 100% liquid reserves – Stablecoins must be fully collateralized by cash-like assets, such as on-demand deposits or short-term government securities.
• Segregated and trust-held reserves – Backing assets must be legally separated from the issuer’s operational funds and stored with a regulated third-party custodian.
• Instant redemption rights – Holders must be able to redeem stablecoins at face value without any minimum threshold.
• Quarterly disclosure obligations – Issuers must publish regular reports detailing:
• The total number of stablecoins in circulation.
• A full breakdown of the assets securing them.

2. Crypto Custody: Airtight Segregation and Real-Time Accountability

For firms providing crypto custody services to UK customers, a mandatory framework will enforce:

• Client asset segregation – All crypto holdings must be held in separate, trust-based accounts under the client’s name.
• Daily reconciliation – Custodians must verify holdings against client records on a daily basis.
• Immediate deficit resolution – Any shortfalls must be corrected without delay and reported to the FCA.
• Rigorous third-party vetting – Any external partnerships must undergo continuous due diligence, with clear liability limits and set-off clauses documented in agreements.

Scope and Exemptions: Who Must Comply?

The regulations apply exclusively to:

✅ UK-issued stablecoins (pegged to fiat currencies). ✅ Custody services for crypto assets held on behalf of UK clients.

Exemptions include: ❌ Foreign-issued stablecoins (unless held in the UK on behalf of third parties). ❌ Self-custody wallets (where users retain full control of their private keys).

Next Steps: Compliance Deadlines and Market Impact

• Summer 2026 – The FCA will publish feedback on public responses to the draft rules.
• October 2027 – Full enforcement begins; firms must obtain FCA authorization and adhere to the new regime.
• Consumer protection & market stability – The goal is to minimize risks, enhance transparency, and bolster oversight in the UK’s digital asset sector.

The new framework signals the UK’s proactive stance in regulating crypto while balancing innovation with financial stability.