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On 28 May 2025, the Financial Conduct Authority (FCA) published two further consultation papers (CPs) on cryptoasset regulation – CP25/14 on stablecoin issuance and cryptoasset custody and CP25/15 on a proposed prudential regime for cryptoasset firms.

Background

The Government plans to create a UK financial services regulatory regime for cryptoassets, including stablecoins, and HM Treasury (HMT) published draft legislation on 30 April 2025.

The FCA will be the regulator for the new regime and it has been engaging with the industry on what that regime may look like, including publishing a discussion paper (DP23/4) on its proposed approach to regulating stablecoins in November 2023. The latest proposals are the result of that engagement.

CP25/14: Stablecoin issuance and cryptoasset custody

In CP25/14, the FCA sets out its proposed rules and guidance for the activities of issuing a qualifying stablecoin and safeguarding qualifying cryptoassets (including qualifying stablecoins), which will be introduced as specified activities through amendments to the Regulated Activities Order (RAO) that are made by the recently published draft legislation. The FCA explains that its proposals are based on the activities as set out in the draft legislation and will be subject to that legislation being finalised.

HMT has previously confirmed that it does not intend to bring stablecoins into UK payments regulation at this time, and the CP therefore does not include proposed requirements for firms carrying out payments using qualifying stablecoins.

Under the proposals, qualifying stablecoin issuers will be required to:

  • Back qualifying stablecoins with secure, liquid assets in a statutory trust for qualifying stablecoin holders (held with a third party custodian).
  • Offer redemption of qualifying stablecoins in exchange for money to all holders.
  • Clearly disclose their policy for redemption and the composition of backing assets to consumers.

The FCA is also proposing to require custodians of qualifying cryptoassets to:

  • Segregate client cryptoassets from their own.
  • Hold them on behalf of clients in a trust.
  • Keep accurate books and records of clients’ cryptoassets holdings.
  • Have adequate controls and governance to protect clients’ cryptoassets holdings.

CP25/15: A prudential regime for cryptoasset firms

In CP25/15, the FCA proposes prudential rules and guidance for issuing qualifying stablecoins and the safeguarding of qualifying cryptoassets. Parts of the proposed prudential regime will be placed in the FCA’s integrated prudential sourcebook, known as COREPRU. The FCA also proposes to set out the sector specific requirements for firms doing regulated cryptoasset activities in a new sourcebook known as CRYPTOPRU, and these firms will be referred to as CRYPTOPRU firms.

CP25/15 focuses only on certain aspects of the prudential regime for CRYPTOPRU firms, and the FCA sets out in a table at paragraph 2.6 of the CP the areas that will be covered in future consultations.

The areas covered by the proposals are:

  • The definition and composition of capital for own funds purposes – including the definition and ‘tiers’ of capital that are eligible as regulatory capital, prior permissions that are required from the FCA to count certain items as regulatory capital and to reduce regulatory capital, and the minimum proportions in which own funds must be held.
  • Own funds requirements – including adding an own funds requirement, a permanent minimum capital requirement for issuers of qualifying stablecoin and for qualifying cryptoasset custodians, a cross-sector fixed overheads requirements, and a ‘K-factor’ requirement.
  • Liquid assets requirements – the FCA sets out the proposed minimum liquidity requirements for CRYPTOPRU firms and the type of assets the firm can hold to meet them.
  • Concentration risk – the FCA explains its proposals for monitoring requirements to address concentration risk, which will apply to all CRYPTOPRU firms.

Next steps

Both consultations close on 31 July 2025.

The FCA notes that the two CPs should be read together and will be followed by further papers as part of its cryptoasset roadmap. It plans to consider responses to both CPs and to set out final rules and guidance in policy statement(s) ahead of implementation.

On 2 May 2025, the Financial Conduct Authority (FCA) published Discussion Paper 25/1: Regulating cryptoasset activities (DP25/1).

Background

DP25/1 is the latest policy publication in the FCA’s crypto roadmap on the future of cryptoasset regulation. So far, the FCA has published DP23/4 in November 2023 on developing a regime for fiat-backed stablecoins and in December 2024 it published DP24/4 outlining proposed frameworks for admissions and disclosures and a market abuse regime for cryptoassets.

On 29 April 2025, HM Treasury (HMT) published a draft statutory instrument (SI), the Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, which sets out provisions to create a new regulatory regime for cryptoassets. The draft SI included amendments to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to:

  • Define “qualifying cryptoassets” and “qualifying stablecoin”.
  • Classify “qualifying cryptoassets” and “qualifying stablecoin” as specified investments under the Financial Services and Markets Act 2000.
  • Specify certain activities relating to these assets as regulated activities, meaning that persons carrying on those activities will need to be authorised for that activity by the FCA.

Proposals

The purpose of DP25/1 is to open a discussion on the features of the future regime for cryptoassets and the FCA is seeking views on how it regulates trading platforms, intermediaries, staking, lending and borrowing, and decentralised finance. It is also seeking feedback on the use of credit to purchase cryptoassets.

Structure

The structure of the DP25/1 is as follows:

  • Chapter 2: Cryptoasset trading platforms (CATPs). The FCA’s proposed policy has been informed by the current rules and obligations applied to trading venues in traditional financial markets. A summary of the key policy proposals can be found in paragraph 2.6.
  • Chapter 3: Cryptoasset intermediaries. The FCA states that its proposed rules are in line with international frameworks. It is considering rules to regulate the conduct of intermediaries in line with the principle of ‘same risk, same regulatory outcome’ wherever possible, taking into account the specific features of the crypto market. A summary of the key policy proposals can be found in paragraph 3.10. Among other things the FCA is considering the necessity of pre-trade transparency requirements and the potential shape and form of post-trade transparency requirements relevant for some crypto intermediaries.
  • Chapter 4: Cryptoasset lending and borrowing. The FCA’s assessment of the cryptoasset lending and borrowing sector identifies various current business models and in DP25/1 it has broadly grouped these into two categories: ‘cryptoasset lending’ and ‘cryptoasset borrowing’. Among other things the FCA is proposing to restrict firms from offering these products to retail consumers in their current structure although it welcomes feedback on this position. The FCA sets out potential requirements from paragraph 4.12 onwards.
  • Chapter 5: Restricting the use of credit to purchase cryptoassets. The FCA is concerned that consumers buying cryptoassets with credit may take on unsustainable debt. Therefore it is exploring whether it would be appropriate to restrict firms from accepting credit as a means for consumers to buy cryptoassets. The FCA’s initial expectation is that qualifying stablecoins issued by an FCA authorised stablecoin issuer would be exempt from potential restrictions, and firms would not be restricted from offering credit options for the purchase of these qualifying stablecoins.
  • Chapter 6: Staking. The FCA notes that there are number of risks regarding staking including that consumers may not fully understand the blockchain validation process and its technology. The FCA sets out a summary of its key proposals in paragraph 6.8 and this includes that firms must get retail customers’ explicit consent on the amount of staked cryptoassets, conditions for payment, repayment, return of cryptoassets and fee charging arrangements, before the firm stakes their cryptoassets.
  • Chapter 7: Decentralised finance (DeFi). The FCA notes that in line with HMT’s intention in the published draft SI, DeFi activities are not covered by the regime where they are truly decentralised. When DeFi involves the proposed regulated activities, and where there is a clear controlling person(s) carrying on an activity, then these activities will be covered by the regime. To achieve the same regulatory outcomes for the same activity, the FCA proposes that the same set of requirements outlined in previous chapters 2-6 will apply. In addition, to help firms understand their obligations, the FCA intends to introduce guidance. Following the publication of DP25/1 the FCA will host a stakeholder forum to foster open dialogue and get insights from experts and market participants.

Next steps

The deadline for comments on DP25/1 is 13 June 2025.

The FCA will consider the feedback and decide on its next steps.

In Q2 2025, the FCA will be publishing a Consultation Paper (CP), consulting on the proposed rules and guidance for issuing a qualifying stablecoin, safeguarding qualifying cryptoassets and specified investment cryptoassets. This will be published alongside a CP on the prudential framework for cryptoassets and prudential requirements for qualifying stablecoins and safeguarding. These activities will also be subject to wider conduct and firm standards, such as the Consumer Duty and rules within the Conduct of Business Sourcebook. The FCA will consult on these standards in a CP on conduct and firm standards for RAO activities planned for Q3 2025.

Comment

Hannah Meakin commented:

“The FCA’s discussion paper represents a significant step towards establishing a comprehensive regulatory framework for cryptoasset activities in the UK. By seeking views on intermediaries, staking, lending and borrowing, and decentralised finance, the FCA is looking to address the current regulatory gaps and provide greater clarity for firms operating in this rapidly evolving sector.

“The discussion about potential requirements for cryptoasset exchanges demonstrates some creativity and sophistication of thinking about how to balance the multiple objectives of user, industry and regulator. The branch and subsidiary combination idea is of particular interest.

“There are of course numerous angles to consider, but the FCA’s first steps in thinking through the complexities and practicalities for those trying to operate global businesses – in compliance with different local regulatory regimes – is welcome.

“The inclusion of considerations around the use of credit for purchasing cryptoassets is also notable and arguably reflects the FCA’s strong stated commitment to consumer protection and market integrity. The FCA is clearly attempting to create a regime that effectively balances innovation with appropriate levels of oversight, yet this is no easy feat and the proof will be in the pudding as to whether they can get this balance right.”

On 6 November 2023, the Financial Conduct Authority (FCA) and Bank of England (BoE) published discussion papers on their proposed approach to regulating stablecoins, and the Prudential Regulation Authority (PRA) published a Dear CEO letter on innovative uses of deposits, e-money and stablecoins. The FCA, BoE and PRA also published a joint “roadmap paper” aimed at explaining how the proposed regimes interact and the regulators’ proposed approach for dual regulation.

The publications follow HM Treasury’s recent Policy Statement which set out its intention to define fiat-backed stablecoins in legislation, expecting it to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency, and hold (in part or wholly) currency as “backing”. HM Treasury is also considering making changes to the payments legislation to enable retail payments for goods and services to be made using fiat-backed stablecoins, including a potential option to allow certain stablecoins issued outside the UK (so-called “overseas stablecoins”) to be used for payments.

FCA DP23/4: Regulating cryptoassets Phase 1 – Stablecoins

The FCA’s discussion paper, DP23/4, sets out its proposed regulation around issuing and holding stablecoins that claim to maintain a stable value relative to a fiat currency by holding assets denominated in that currency.

Under the proposals, the FCA will regulate the issuance and custody of fiat-backed stablecoins under the Financial Services and Markets Act 2000, and the use of these stablecoins as a means of payment under the Payment Services Regulations 2017. DP23/4 is intended to help inform the development of the regime for fiat-backed stablecoins as a means of payment and ensure any regime the FCA creates meets its objectives, so that firms can facilitate payments safely and securely using fiat-backed stablecoins.

The FCA notes that the design of its new regime for regulating these activities is not entirely separate from the rest of the future regime. Various aspects, including, for example, its expectations of firms that provide custody of regulated stablecoins (or the cryptographic “private keys” to access them) would likely be the same when they provide custody of other types of cryptoassets that come into regulation.

The proposals are intended to be of interest to anyone in the UK who has bought, or may in the future buy, fiat-backed stablecoins, as well as organisations and individuals that participate in the cryptoasset sector (specifically, cryptoassets that claim a form of stability and make use of a stabilisation mechanism).

Feedback on DP23/4 is invited by 6 February 2024. The FCA will consider that feedback to decide its next steps, and will consult on any of the proposals from DP23/4 that it proposes to adopt as part of its final rules. In addition to new Handbook rules, it will also consider whether there are other aspects of the existing rules that may need changing, raising with HM Treasury and other stakeholders if necessary.

BoE discussion paper: Regulatory regime for systemic payment systems using stablecoins and related service providers

The BoE’s discussion paper outlines how the BoE would regulate operators of systemic payment systems using stablecoins – payment systems which, if widely used for retail payments in the UK, could otherwise pose risks to financial stability. The BoE would also regulate other entities providing services to these payment systems, e.g. stablecoin issuers and wallet providers, where they could otherwise pose financial stability risks.

The discussion paper sets out the BoE’s proposed regulatory framework for these systemic payment systems, focusing on sterling-denominated stablecoins because it considers these are the most likely digital settlement assets to be used widely for payments. Part one of the paper outlines the BoE’s role in ensuring the safety of money and payments and the scope of the regime, and Part two explains the proposed requirements of the regime. The BoE explains that it intends to follow a similar regulatory approach as for other payment systems, but will adapt it appropriately. There will be new regulatory requirements to cover both the risks of stablecoins as a new form of money and a means of payment.

Like the FCA’s DP23/4, views on the BoE’s discussion paper are sought by 6 February 2024. The BoE notes that the paper represents an exploratory phase in developing the new regime, after which it will consider the responses received and consult on its final proposed regime. The regime may be adapted over time as the nascent industry evolves.

PRA Dear CEO letter

The Dear CEO letter published by the PRA sets out how it expects deposit-takers to address the risks that arise from issuing multiple forms of digital money – and in particular, risks that may arise in relation to the availability in parallel of deposits, e-money and regulated stablecoins – to retail customers, while welcoming the benefits that could come from innovation in this area. The letter also sets out the PRA’s broader expectations for banks regarding their use of digital money for retail or wholesale innovations, in areas such as operational resilience, anti-money laundering, counter-terrorist financing, and liquidity and funding risks.

The PRA asks deposit-takers to read the letter in conjunction with the BoE and FCA discussion papers and the regulators’ joint roadmap (discussed below), as well as HM Treasury’s recent Policy Statement on stablecoins. It also asks deposit-takers to keep their supervisor(s) updated about any material developments in their planned innovations in the use of digital money or money-like instruments, and how their plans meet the expectations set out in the letter. The PRA says it will continue to monitor developments and to work with other UK authorities on the development of the overall regulatory framework.

Joint roadmap paper

The cross-authority roadmap paper published by the FCA, BoE and PRA sets out the regulators’ approach to innovation in payments, money and money-like instruments. It explains how UK authorities’ current and proposed regulatory regimes will interact and should be read in conjunction with the other publications outlined above.

The regulators explain that they have published their approach jointly to enable them to prevent regulatory arbitrage, provide certainty to firms and developers about the regime applicable to them based on the form of money or money-like instrument they want to issue, and maintain the confidence of households and businesses in their ability to make payments on a daily basis.

They also note that the regime(s) applicable to firms engaged in issuing different forms of money and money-like instruments and operating payment systems will depend on the purpose of their business, how it is conducted, and the risks it presents. Business models may range from issuing the digital money or money-like instruments with the primary purpose of generating revenue by providing payment services, to business models where revenues are generated primarily through maturity transformation. In the latter case, client funds are received and used to invest in risky assets that offer uncertain returns. E-money institutions are an example of the former business model and banks an example of the latter. The regulators note that these business models take very different types of risk, and this is reflected in the applicable regulatory regime.

The roadmap sets out the regulators’ approach in relation to three categories of digital money and money-like instruments that are in use or in prospect – e-money, stablecoins, and “tokenised” bank deposits.

On 6 November 2023, the Financial Conduct Authority (FCA) and Bank of England (BoE) published discussion papers on their proposed approach to regulating stablecoins, and the Prudential Regulation Authority (PRA) published a Dear CEO letter on innovative uses of deposits, e-money and stablecoins. The FCA, BoE and PRA also published a joint “roadmap paper” aimed at explaining how the proposed regimes interact and the regulators’ proposed approach for dual regulation.

The publications follow HM Treasury’s recent Policy Statement which set out its intention to define fiat-backed stablecoins in legislation, expecting it to capture those stablecoins which seek to maintain a stable value by reference to a fiat currency, and hold (in part or wholly) currency as “backing”. HM Treasury is also considering making changes to the payments legislation to enable retail payments for goods and services to be made using fiat-backed stablecoins, including a potential option to allow certain stablecoins issued outside the UK (so-called “overseas stablecoins”) to be used for payments.

FCA DP23/4: Regulating cryptoassets Phase 1 – Stablecoins

The FCA’s discussion paper, DP23/4, sets out its proposed regulation around issuing and holding stablecoins that claim to maintain a stable value relative to a fiat currency by holding assets denominated in that currency.

Under the proposals, the FCA will regulate the issuance and custody of fiat-backed stablecoins under the Financial Services and Markets Act 2000, and the use of these stablecoins as a means of payment under the Payment Services Regulations 2017. DP23/4 is intended to help inform the development of the regime for fiat-backed stablecoins as a means of payment and ensure any regime the FCA creates meets its objectives, so that firms can facilitate payments safely and securely using fiat-backed stablecoins.

The FCA notes that the design of its new regime for regulating these activities is not entirely separate from the rest of the future regime. Various aspects, including, for example, its expectations of firms that provide custody of regulated stablecoins (or the cryptographic “private keys” to access them) would likely be the same when they provide custody of other types of cryptoassets that come into regulation.

The proposals are intended to be of interest to anyone in the UK who has bought, or may in the future buy, fiat-backed stablecoins, as well as organisations and individuals that participate in the cryptoasset sector (specifically, cryptoassets that claim a form of stability and make use of a stabilisation mechanism).

Feedback on DP23/4 is invited by 6 February 2024. The FCA will consider that feedback to decide its next steps, and will consult on any of the proposals from DP23/4 that it proposes to adopt as part of its final rules. In addition to new Handbook rules, it will also consider whether there are other aspects of the existing rules that may need changing, raising with HM Treasury and other stakeholders if necessary.

BoE discussion paper: Regulatory regime for systemic payment systems using stablecoins and related service providers

The BoE’s discussion paper outlines how the BoE would regulate operators of systemic payment systems using stablecoins – payment systems which, if widely used for retail payments in the UK, could otherwise pose risks to financial stability. The BoE would also regulate other entities providing services to these payment systems, e.g. stablecoin issuers and wallet providers, where they could otherwise pose financial stability risks.

The discussion paper sets out the BoE’s proposed regulatory framework for these systemic payment systems, focusing on sterling-denominated stablecoins because it considers these are the most likely digital settlement assets to be used widely for payments. Part one of the paper outlines the BoE’s role in ensuring the safety of money and payments and the scope of the regime, and Part two explains the proposed requirements of the regime. The BoE explains that it intends to follow a similar regulatory approach as for other payment systems, but will adapt it appropriately. There will be new regulatory requirements to cover both the risks of stablecoins as a new form of money and a means of payment.

Like the FCA’s DP23/4, views on the BoE’s discussion paper are sought by 6 February 2024. The BoE notes that the paper represents an exploratory phase in developing the new regime, after which it will consider the responses received and consult on its final proposed regime. The regime may be adapted over time as the nascent industry evolves.

PRA Dear CEO letter

The Dear CEO letter published by the PRA sets out how it expects deposit-takers to address the risks that arise from issuing multiple forms of digital money – and in particular, risks that may arise in relation to the availability in parallel of deposits, e-money and regulated stablecoins – to retail customers, while welcoming the benefits that could come from innovation in this area. The letter also sets out the PRA’s broader expectations for banks regarding their use of digital money for retail or wholesale innovations, in areas such as operational resilience, anti-money laundering, counter-terrorist financing, and liquidity and funding risks.

The PRA asks deposit-takers to read the letter in conjunction with the BoE and FCA discussion papers and the regulators’ joint roadmap (discussed below), as well as HM Treasury’s recent Policy Statement on stablecoins. It also asks deposit-takers to keep their supervisor(s) updated about any material developments in their planned innovations in the use of digital money or money-like instruments, and how their plans meet the expectations set out in the letter. The PRA says it will continue to monitor developments and to work with other UK authorities on the development of the overall regulatory framework.

Joint roadmap paper

The cross-authority roadmap paper published by the FCA, BoE and PRA sets out the regulators’ approach to innovation in payments, money and money-like instruments. It explains how UK authorities’ current and proposed regulatory regimes will interact and should be read in conjunction with the other publications outlined above.

The regulators explain that they have published their approach jointly to enable them to prevent regulatory arbitrage, provide certainty to firms and developers about the regime applicable to them based on the form of money or money-like instrument they want to issue, and maintain the confidence of households and businesses in their ability to make payments on a daily basis.

They also note that the regime(s) applicable to firms engaged in issuing different forms of money and money-like instruments and operating payment systems will depend on the purpose of their business, how it is conducted, and the risks it presents. Business models may range from issuing the digital money or money-like instruments with the primary purpose of generating revenue by providing payment services, to business models where revenues are generated primarily through maturity transformation. In the latter case, client funds are received and used to invest in risky assets that offer uncertain returns. E-money institutions are an example of the former business model and banks an example of the latter. The regulators note that these business models take very different types of risk, and this is reflected in the applicable regulatory regime.

The roadmap sets out the regulators’ approach in relation to three categories of digital money and money-like instruments that are in use or in prospect – e-money, stablecoins, and “tokenised” bank deposits.