UK’s FCA Opens Consultation on Stablecoin and Crypto Custody Regulations

The Financial Conduct Authority (FCA) of the United Kingdom has opened a consultation period to gather public input on newly proposed regulations targeting stablecoin issuers and cryptocurrency custody providers. Announced on 28 May, this regulatory initiative seeks to lay a robust foundation for a secure and innovative crypto ecosystem in the UK.

Ensuring Stability and Transparency for Stablecoins

Under the proposed regulatory framework, stablecoin issuers operating in the UK will be obligated to clearly disclose their asset management strategies, ensuring transparency around how their stablecoins are backed. The FCA emphasised the importance of stability, requiring that stablecoins maintain their value consistently with the reference currency.

The proposals include a requirement for stablecoin issuers to offer holders the ability to redeem stablecoins at face value, irrespective of fluctuations in the underlying asset portfolio. Redemption requests should be honoured by the issuer within one business day of receipt, ensuring liquidity and maintaining consumer trust.

Crypto Custody Providers Face Enhanced Security Standards

Alongside stablecoin regulations, the FCA outlined new stringent requirements for cryptocurrency custody services. The core objective is safeguarding user assets and ensuring they remain accessible at all times. Custody providers will need to demonstrate robust security protocols and processes capable of preventing loss or unauthorised access.

Jamie Jefferson Ng, Senior Associate at Ashurst, noted the significance of these developments, stating: “These proposed rules illustrate a deliberate and cautious approach—one that prioritises getting regulation right rather than rushing to be first. It sets a strong precedent for responsible crypto innovation globally.”