UK FCA requests public comments on stablecoin, crypto custody regulation

The UK Financial Conduct Authority (FCA) has launched a public consultation seeking feedback on proposed regulations for stablecoin issuers and crypto custody providers. These draft rules represent a significant step toward formal crypto regulation in the UK and are based on extensive industry roundtables and prior feedback.

The FCA aims to ensure that regulated stablecoins maintain their value and that customers receive clear information on how the backing assets are managed.

Issuers would be required to allow holders to redeem stablecoins at par value with the reference currency, regardless of the backing asset portfolio's value, with redemption payments processed by the end of the next business day after a valid request.

The FCA also recommends appointing independent third-party custodians to hold reserve assets to enhance transparency and security.

The FCA is coordinating with the Bank of England, which plans to issue a complementary consultation later in the year for stablecoins expected to operate at systemic scale. This collaboration aims to build a robust and integrated stablecoin regulatory framework.

New requirements are proposed for firms providing crypto custody services to ensure consumer crypto assets are securely held and accessible at all times. These rules seek to reduce the likelihood and impact of firm failures in the crypto custody and stablecoin sectors, enhancing consumer protection and market integrity.

The FCA emphasizes balancing support for innovation in the crypto sector with the need for market integrity and consumer trust, recognizing that crypto is largely unregulated in the UK at present.

The consultation follows Treasury's draft legislation published in April 2025, with a feedback deadline set for July 31, 2025. The FCA plans to finalize and publish the rules in 2026.

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