FCA consults on stablecoins and prudential regulation of crypto firms

The FCA has published 2 consultation papers to take the next steps towards regulation of the crypto markets.

• the paper on stablecoin issuance and cryptoasset custody covers:
  • requirements that issuers of qualifying stablecoins will need to comply with when issuing a qualifying stablecoin referencing a single fiat currency – covering offer and redemption of qualifying stablecoins, holding and management of qualifying stablecoin backing assets and key information that issuers will need to disclose about their qualifying stablecoins;
  • proposals for a statutory trust over backing assets held by the issuer for the benefit of stablecoin holders – and to require that the issuer appoint an unrelated third party to safeguard backing assets;
  • key principles – that qualifying stablecoins are designed and built with the risks they present addressed, that they are fully backed at all times, that the backing assets are managed in a prudent manner and that those assets are safeguarded effectively, that redemption is guaranteed by the issuer at par, that third parties issuers appoint are used responsibly and that disclosures are accurate and accessible;
  • draft Handbook text including a set of new definitions and new chapters in CASS.
• the paper on a prudential regime for cryptoasset firms covers:
  • proposed prudential rules and guidance for issuing a qualifying stablecoin and safeguarding qualifying cryptoassets – housed partly within a new part of an integrated prudential sourcebook, which will be called COREPRU;
  • creating a new type of firm called a CRYPTOPRU firm;
  • proposals on the types and tiers of capital that will be eligible as own funds and prior permissions that firms will need to have to count certain items as regulatory capital or reduce their requirement;
  • proposals for a fixed overhead requirement, a permanent minimum requirement and how to calculate specific K-Factors;
  • proposals for minimum liquidity requirements;
  • proposals for dealing with concentration risk;
  • draft text for the new COREPRU; and
  • the FCA has also set out which requirements it will be consulting on later.

Consultation on both papers closes on 31 July and the FCA will publish its final rules in 2026.