The United Kingdom is taking significant strides to establish a clear and robust regulatory framework for the burgeoning cryptocurrency sector, focusing particularly on stablecoins and digital asset custody services. This proactive initiative involves a close collaboration between the nation’s key financial regulators: the Financial Conduct Authority (FCA) and the Bank of England (BoE), aiming to foster responsible innovation while ensuring market integrity and consumer protection within the digital finance landscape.
Key Pillars of UK Crypto Regulation
Stablecoin Framework and Oversight
Central to the new regulatory discourse are stablecoins, often seen as a vital link between conventional finance and blockchain technology. The FCA’s proposals require issuers of regulated stablecoins to employ robust systems for managing their backing assets. They must also provide transparent information on how these assets are held and safeguarded, ensuring stability and clarity for users.
David Geale, Executive Director for Payments and Digital Finance at the FCA, commented on the balance sought: “While crypto currently operates largely unregulated in the UK, our goal is to strike a balance that supports beneficial innovation, underpinned by market integrity and trust.” The FCA is also exploring integrating a specific focus on stablecoins into its innovation services, creating new avenues for firms developing compliant products.
Complementing the FCA’s work, the Bank of England will oversee stablecoins deemed systemically important for financial stability. Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, announced plans for a complementary consultation paper. This paper will address the regulatory treatment of systemic stablecoins, including the potential for allowing returns on their backing assets. Ms. Breeden emphasized ongoing collaboration: “We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime, including how firms transition within the framework.”
Strengthening Crypto Custody Standards
Beyond stablecoins, the FCA’s consultation also details regulations for crypto asset custody services. The proposed regime mandates custodians to ensure customer assets are securely held and consistently accessible. This entails clear requirements for asset storage, management, and strict segregation from the firm’s own assets, significantly reducing the risk of loss or misuse.
Enhancing Operational Resilience
New expectations are set for firms involved in stablecoin issuance or crypto custody, with a strong emphasis on operational resilience. Measures aimed at minimizing operational failures include enhanced governance standards, stringent capital requirements, and robust protections for client assets in cases of firm insolvency. These provisions are crucial for building a secure and trustworthy environment for digital asset operations.
The public is invited to submit feedback on these proposals until July 31, 2025. The finalized regulatory rules are anticipated to be published in 2026, marking a significant step in the UK’s development of a well-regulated and innovation-friendly digital asset ecosystem.
Blockchain developer and writer, Daniel combines hands-on coding experience with accessible storytelling. He holds multiple blockchain certifications and authors technical explainers, protocol deep-dives, and developer tutorials to help readers navigate the intersection of code and finance.