FCA Seeks Public Input on UK Stablecoin and Crypto Custody Regulations

The UK’s Financial Conduct Authority (FCA) is inviting public comment on its proposed regulations for stablecoins and cryptocurrency custody. This follows earlier industry consultations and aims to balance innovation with robust market safeguards.

In a May 28 announcement, the FCA highlighted these proposals as a key step towards comprehensive crypto regulation in the UK. David Geale, Executive Director of Payments and Digital Finance, emphasized the FCA’s commitment to supporting innovation while prioritizing market integrity and consumer trust. He stated, “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.”

The FCA will collaborate with the Bank of England on stablecoin regulation. Deputy Governor Sarah Breeden announced a complementary consultation paper from the Bank of England later this year for systemically significant stablecoins.

Stablecoin Value and Transparency

The proposed regulations aim to ensure stablecoins maintain their pegged value and provide transparent information about the management of backing assets. The FCA’s recommendations include requiring issuers to allow redemption at par value and appointing independent custodians for reserve assets. The FCA proposes: “We propose to require issuers to provide holders with the right to redeem qualifying stablecoins at par value with the reference currency, irrespective of the value of the backing assets portfolio, with a payment order placed to an account in the name of the holder at the latest by the end of the business day following receipt of a valid request.”

Crypto Custody: Security and Accessibility

Separate proposals, detailed in a discussion paper, address crypto custody services. These rules prioritize the security and accessibility of customer assets. The FCA aims to “require firms providing crypto custody services…to ensure they are effectively secured and can be easily accessed at any time.” These measures are intended to enhance resilience within both the crypto custody and stablecoin sectors. These actions align with Chancellor Rachel Reeves’ vision for a comprehensive UK crypto regulatory framework.