UK FCA Opens Consultation on Stablecoins and Crypto Custody Rules

Highlights:

• The UK’s financial watchdog is seeking feedback on its stablecoin and crypto custody rules by July 31, 2025.
• Stablecoin issuers must allow redemption at par with transparent asset management.
• Crypto custody firms must secure assets and ensure user access at all times.

The UK’s Financial Conduct Authority (FCA) has announced a public consultation about the regulations they plan for stablecoins and crypto custody. The main goal of these new rules is to ensure crypto companies work in a secure and more transparent space. Through the FCA, stablecoin issuers and crypto custody providers benefit from support for innovation while ensuring the sector stays trustworthy.

Stablecoins are digital assets that have the same worth as the US dollar and the British pound. They help transactions across borders enjoy better efficiency and faster settlement. The FCA’s proposals are designed to help regulated stablecoins keep their value stable consistently. Under the rules, issuers are required to clearly explain to customers how they manage their backing assets. A clear view helps both consumers and the market feel secure.

We’re seeking views on stablecoins and safeguarding crypto to help shape a safe and competitive crypto sector. Our aim is to ensure regulated stablecoins maintain their value and customers are provided with the information they need.https://t.co/L180XEtKzt#Crypto #Stablecoins pic.twitter.com/ndpv0SzVH3

— Financial Conduct Authority (@TheFCA) May 28, 2025

Proposed Rules for Stablecoins and Crypto Custody

The FCA proposes that stablecoin issuers should grant holders the ability to redeem their qualifying stablecoins for the same amount as the reference currency. Requested redemptions should be processed quickly and payments should be made by the end of the workday after the request. In addition, to increase transparency and security, issuers may be required to appoint independent custodians to store the reserve assets from stablecoins.

The financial watchdog aims to team up with the Bank of England to develop a clear set of rules for stablecoins. Later this year, the Bank of England will publish a consultation paper. It will address stablecoins that will be used systemically and cover feedback the industry has offered, including the idea of allowing returns from the assets backing them. The purpose of this collaboration is to form a robust and consistent framework for UK stablecoins.

FCA guidelines for crypto custody make it necessary for firms to properly store digital assets. Moreover, they ensure customers can access these assets around the clock. The proposals are aimed at cutting risks from custody issues and lowering the impact of losses on customers. In addition, the FCA aims to minimize both the chances and the results of failures by firms issuing stablecoins and crypto custody. Consequently, these actions will support the reliability and strength of the crypto market sectors.

Timeline and Industry Impact

The consultation follows the UK Treasury’s release of draft legislation in April of 2025. Feedback on the proposals can be submitted by interested stakeholders until the end of July 2025. Furthermore, the FCA will use the input it receives to formulate and publish the new rules in 2026.

As well as regulating them, the FCA will consider making stablecoins part of its innovation services. This type of effort may support fintech firms in designing compliant stablecoins while operating within a friendly regulatory framework. The FCA highlights that ensuring market integrity as innovation grows encourages healthy growth in the UK crypto industry.

With these rules, the FCA moves a step forward in formalizing crypto regulation in the UK. Defined rules for stablecoins and crypto custody providers will improve how consumer protection is offered and protect the market’s integrity. Moreover, this effort highlights the rising global push to control digital assets as their adoption grows.