On 21 April 2026, HM Treasury (HMT) issued a policy note and draft statutory instrument on amendments to the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (the Crypto Regulation).

Policy note and draft SI

Earlier this year the government passed the Crypto Regulation. The draft statutory instrument (draft SI) now published by HMT makes certain amendments to the Crypto Regulation in order to reduce undue barriers to firms seeking to provide payment services with UK qualifying stablecoins (UKQS) ahead of payment services reforms. The draft SI also makes certain amendments to the Crypto Regulation in light of industry feedback. The policy note issued by HMT summaries the main measures in the draft SI and their policy intent.

Payments with UK-issued qualified stablecoins

The HMT states that it will soon be consulting on bringing payment services utilising stablecoins that have been issued in the UK by a firm authorised for the new regulated activity in regulation 9M (issuing qualifying stablecoin) into regulated payments as part of its planned payment services reforms. To avoid undue barriers to firms seeking to provide payment services with UKQS ahead of the payments services reforms, the draft SI carves UKQS out of the new activities of dealing in qualifying cryptoassets as principal, dealing in qualifying cryptoassets as agent and arranging deals in qualifying cryptoassets.

HMT does not, however, consider it appropriate to permanently remove lending and borrowing activities involving UKQS from the regulatory perimeter. Lending and borrowing activities involving UKQS will remain within scope of the cryptoassets dealing activities so that the Financial Conduct Authority (FCA) may create rules to address the associated consumer risks. HMT is also aware that leaving UKQS lending and borrowing in the dealing perimeter may create frictions for the use of UKQS in collateral arrangements and it will try and mitigate these and will seek input from industry on how best to achieve this. HMT will also explore any frictions that could remain for certain types of cross-border stablecoin payments by virtue of overseas-issued stablecoins remaining inside the perimeter for cryptoasset dealing and arranging.

HMT adds that taking UKQS out of the regulatory perimeter for cryptoasset dealing and arranging until they are brought within the regulated payments perimeter will not remove the need for firms undertaking UKQS payments to secure permissions for cryptoasset safeguarding under the Crypto Regulation where they safeguard or arrange for another to safeguard cryptoassets (including UKQS) on behalf of another. HMT will be consulting on a proposal that, under the payments services reforms, safeguarding undertaken in the course of providing payments services should sit within the payments regime rather than the crypto regime.

HMT is also clarifying in the draft SI that the temporary settlement exclusion from cryptoasset safeguarding for firms that hold cryptoassets ‘temporarily to facilitate the settlement of a transaction’ only applies where the activity is ancillary to dealing or arranging and therefore does not apply to holding UKQS in the course of providing payments services.

Consequential changes

HMT intends to:

  • Make changes to the perimeter for the financial promotions regime so that it remains in line with the Crypto Regulation’s regulated activities. Therefore transactions involving UKQS (and no other cryptoassets) will not be subject to the financial promotions regime, with the exception of lending and borrowing arrangements. The regulated activity of issuing a qualifying stablecoin has also been added as a new activity to the Financial Promotions Order.
  • Turn on early the provisions in the crypto regime that carve out stablecoin backing assets from being either a collective investment scheme or alternative investment fund. HMT believes that this will help avoid barriers to stablecoin adoption for different use cases and associated services ahead of the crypto regime provisions coming into full force in late 2027.

Additional proposals

The policy note sets out two further proposals regarding proprietary trading/market making and central securities depositories (CSDs):

  • Proprietary trading/market making: HMT notes that in general terms, the UK crypto regime seeks to require firms to secure authorisation from the FCA where they are providing services within scope of the regulated activities either in the UK or to UK customers. However, in the case of the dealing activities, HMT feels that this approach could stand to create uncompetitive dynamics for firms where they are trading on their own account and not providing a service to client. As such HMT is concerned that this stands to push firms offshore to the detriment of the UK and therefore the draft SI seeks to address this matter so that firms can provide market making services in the UK without being penalised.
  • CSDs: HMT notes that CSDs are exempted under UK financial services law from needing authorisation for activities that they provide as part of their core functions. CSDs and the nominee companies they use for the purposes of safeguarding and administering assets are not required to secure safeguarding permissions under Article 40 of the Regulated Activities Order 2001. However, this exemption does not apply to exempt persons’ nominee companies for cryptoasset safeguarding. HMT is proposing to correct this discrepancy for specified investment cryptoassets as part of the draft SI. HMT believes that this will help ensure the avoidance of barriers to UK innovation with tokenised securities.

Next steps

HMT will accept feedback on the proposals and draft SI until 22 May 2026.