UK FCA Seeks Public Input on New Stablecoin and Crypto Custody Rules
The UK’s Financial Conduct Authority (FCA) has called for public feedback on proposed regulations for stablecoins and cryptocurrency custody services.
In a statement released on May 28, the FCA described the draft rules as a significant step toward a comprehensive crypto regulatory framework. The proposals build on insights gathered from previous industry roundtables and consultations. David Geale, Executive Director of Payments and Digital Finance at the FCA, emphasized the agency’s goal of fostering innovation while ensuring market integrity:
“At the FCA, we have long supported innovation that benefits consumers and markets. Currently, crypto remains largely unregulated in the UK. We want to support a sector that enables innovation and is grounded in trust and integrity.”
The FCA also confirmed it will coordinate with the Bank of England to oversee stablecoins. Sarah Breeden, Deputy Governor of the Bank of England, stated that the central bank will issue its own consultation later this year for stablecoins expected to operate at a systemic scale.
Ensuring Stablecoin Reliability
The UK FCA proposals are designed to ensure that regulated stablecoins maintain a consistent value. Issuers would be required to clearly disclose how reserve assets are managed and must appoint independent third-party custodians to hold those reserves. Additionally, consumers must have the right to redeem stablecoins at par value:
“We propose that issuers provide holders with the right to redeem qualifying stablecoins at face value in the reference currency, regardless of changes in the value of the backing assets. The redemption should be processed to the holder’s account by the end of the next business day following a valid request.”
According to Breeden, these proposals contribute to building the UK’s broader regulatory framework for stablecoins.
New Rules for Crypto Custody
Alongside stablecoin regulation, the FCA is also proposing rules for crypto custody providers, as outlined in a separate discussion paper. These regulations aim to protect consumer assets and ensure they remain secure and accessible:
“Firms responsible for safeguarding consumers’ crypto must ensure the assets are effectively secured and available for access at any time.”
The measures also aim to reduce the risks and potential fallout from failures in both the stablecoin and crypto custody sectors.
These initiatives follow a recent announcement by Chancellor of the Exchequer Rachel Reeves, who revealed plans for a comprehensive crypto regulatory regime intended to position the UK as a global leader in the sector.
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