UK FCA Consults on Strict Stablecoin and Crypto Custody Regulations to Boost Market Integrity
The UK’s Financial Conduct Authority (FCA) is advancing comprehensive stablecoin and cryptocurrency custody regulations, initiating public consultations to refine draft guidelines issued in alignment with HM Treasury’s framework. The new rules, covering both stablecoin issuers and digital asset custodians, propose several key measures: mandatory appointment of independent custodians for stablecoin reserves, a 5% on-demand deposit requirement, prohibition of interest payments to holders, and guaranteed redemption within one business day. Custodians must meet stringent liquidity and capital requirements, maintain robust accounting controls, and both issuer and custodian entities must obtain FCA authorization pursuant to the Financial Services and Markets Act 2000. Minimum capital thresholds are set at £350,000 for stablecoin issuers and £150,000 for custodians. Systemically important stablecoins will come under the Bank of England’s regulatory purview, with further guidance to follow in late 2025. The consultation remains open until July 31, 2025, and final regulations are expected in 2026. These proposals aim to enhance market integrity, bolster consumer protection, and develop a robust, competitive digital assets ecosystem in the UK. For crypto traders, these regulations promise clearer operational guidelines but may increase compliance costs and introduce temporary market uncertainty, particularly as the sector adapts to stricter requirements and oversight.
Neutral
The FCA’s proposed stablecoin and custody regulations introduce strict requirements for issuers and custodians, aiming to strengthen market integrity and consumer protection in the UK. While these clear rules may enhance long-term market confidence and attract institutional participation, the immediate effect could be increased compliance costs and operational challenges for crypto businesses. Historically, similar regulatory introductions have caused temporary uncertainty and cautious trading, but have not triggered significant price moves unless followed by unexpectedly harsh enforcement or bans. As the rules remain in consultation, the market is likely to take a wait-and-see approach. Therefore, the current impact is best considered neutral—neither distinctly bullish nor bearish for stablecoins and the broader UK crypto market until final regulations and their enforcement details are clarified.