FCA, Bank of England team up to work on UK stablecoin regime and crypto regulation

The UK’s Financial Conduct Authority (FCA) in collaboration with the Bank of England will be creating and proposing detailed regulations for stablecoins and crypto custody services.  

The attempt to bring clarity and security to the cryptocurrency industry has reached a new milestone with both the UK’s FCA and the Bank of England collaborating to propose a regulatory system. 

UK FCA and Bank of England present crypto regulation

In an effort to bring greater clarity and security to the crypto industry, the UK’s Financial Conduct Authority (FCA) has published detailed proposals that outline the regulations of stablecoins and crypto custody services. 

The FCA is partnering closely with the Bank of England to ensure consistent oversight and stability in the United Kingdom. 

Stablecoins are often considered to be a bridge between traditional finance and blockchain technology due to their ability to facilitate efficient and low-cost transactions.  

Under the proposals, issuers of regulated stablecoins must use robust systems to manage backing assets. They will also be required to provide transparent information about how these assets are held and protected.

“At the FCA, we have long supported innovation that benefits consumers and markets,” David Geale, the Executive Director for Payments and Digital Finance at the FCA said. “At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”

The new regulatory regime is aimed at supporting innovation in the crypto space while also ensuring the integrity of the market, consumer protection, and strength of the system. 

To create the proposals, there was extensive engagement with the industry, taking feedback from previous discussion papers and roundtables into account. Before the announcement of the regulatory proposals, HM Treasury drafted legislation that was published in April 2025.

To further encourage innovation, the FCA announced that it will consider adding a specific focus on stablecoins to its innovation services in the coming months, which would create new opportunities for firms developing regulated stablecoin products.

The Bank of England, on the other hand, will oversee the stablecoins that operate at a systemic scale. Sarah Breeden, the Deputy Governor for Financial Stability at the Bank of England, welcomed the FCA’s proposals and emphasized the central bank’s intent to publish a complementary consultation paper later this year. 

The paper will address the regulatory treatment of systemic stablecoins, including the possibility of allowing returns on the assets backing them. 

“We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime,” Breeden said, “including how firms transition within the regime.” 

FCA draft covers crypto custody 

Other than offering clarity about stablecoins, the FCA’s consultation paper also mentions rules for crypto asset custody.

Under the proposed regulatory regime, crypto custodians must ensure that customers’ assets are effectively secured and remain accessible at all times. Enforcing this will likely involve creating specific requirements for how assets will be stored, managed, and segregated from firm assets, which would reduce the risk of loss or misuse.

The FCA’s proposals include new expectations for firms that offer either stablecoin issuance or crypto custody that will reduce the likelihood and impact of operational failures. The methods to achieve this may include governance standards, capital requirements, and measures to protect client assets in the event of a firm’s insolvency.

The public has until July 31, 2025, to provide feedback on the proposals.