The United Kingdom is quickening the pace on the new crypto regulatory regime. The Financial Conduct Authority (FCA) published three papers in quick succession in May 2025: a discussion on key policy positions (DP25/1) and two consultations on detailed rules (CP25/14 and CP25/15). This blog focuses on CP25/14. Please see our upcoming separate blogs on the other proposals.
CP25/14 sets out proposed rules for, amongst others, issuing stablecoins. Like the other crypto regulated activities, issuing stablecoins will require prior authorisation from the FCA. While design, creation and/or minting of stablecoins in itself will not be a regulated activity, the FCA nonetheless intends to impose requirements on issuers in those regards. For example, issuers must identify and manage the risks associated with the design/build of its stablecoins.
Understandably, most attention is given to the "backing assets" used to maintain the stable value of a stablecoin, such as what assets can be used as backing assets and what the composition of the backing asset pool must be. By default, an issuer is only allowed to hold what is termed "core backing assets" (essentially, short-term cash deposits and government debts with a maturity of one year or less). If an issuer wishes to hold other backing assets, which are called "expanded backing assets," these must be within a list of permitted categories (such as longer-maturity government debts, certain money market funds and repurchase agreements) and the issuer must get approval from the FCA in advance. Issuers must also ensure at least 5% of the backing assets are bank deposits. Issuers allowed to hold expanded backing assets will also be subject to additional requirements on the composition of their backing asset pool.
The backing assets must also be segregated from the issuer's own assets and held in a statutory trust for the benefit of all coin-holders. If the issuer issues more than one stablecoin, each stablecoin must have its own separate backing assets pool. In addition, the custodian holding the backing assets must be independent of the issuer or its group.
Other proposed requirements include at-par redemption and various disclosures.
It is worth noting that "stablecoin" for these purposes means a stablecoin referencing a single fiat currency. Further, "issuing" includes "offering," "undertaking to redeem," or "carrying on" the relevant stablisation mechanism, or "arranging" for another to perform these activities (these definitions are set out in separate legislation and yet to be finalised). In other words, the impact of these requirements may potentially be much broader than what is typically understood in the crypto market as a stablecoin issuer. For example, a crypto exchange may be considered an "issuer" for arranging to offer a stablecoin, or a firm administering the stablisation arrangements may also be an "issuer" for carrying on the stablisation-related activities. The consultation is open for feedback untill 31 July 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
