In this in-depth episode, we break down the FCA’s latest consultation paper, CP25/14, on the proposed regulatory framework for the issuance of qualifying stablecoins and custody of qualifying cryptoassets in the UK.
From consumer protection to market integrity, the FCA’s goal is clear: make stablecoins function like trusted, money-like instruments while setting robust guardrails for those safeguarding cryptoassets.
Key Highlights:
🔹 Stablecoins Must Be Fully Backed: The FCA proposes that all qualifying stablecoins must be 1:1 backed by assets, with a statutory trust imposed over backing assets. This ensures enhanced security for holders and robust liquidity safeguards.
🔹 Redemption at Par, No Interest Pass-Through: Issuers must redeem at par (face value) and are barred from distributing interest on backing assets—ensuring these coins don't masquerade as investment products.
🔹 Dual Regulation for Systemic Issuers: Stablecoins deemed systemic will be jointly regulated by the FCA and Bank of England, with the Payment Systems Regulator also playing a role.
🔹 Custody Rules Under CASS 17: Any UK-based firm (or firm servicing UK clients) offering custody of qualifying cryptoassets must hold assets under a non-statutory trust and implement clear governance, selection, and oversight frameworks for third-party custody providers.
🔹 Expanded Backing Assets? Prepare for the BACR: Issuers using a broader range of backing assets (e.g. MMFs, longer-term debt) must calculate and maintain a minimum ratio of core assets through the Backing Asset Composition Ratio—based on peak redemption forecasts.
🔹 Strict Redemption Timing: All redemption requests must be fulfilled by T+1 (next business day), unless prohibited by law or if the customer requests an alternate currency.
🔹 Consumer Duty Considerations: While CP25/14 contains its own set of obligations, the broader application of the FCA Consumer Duty to crypto markets is expected in future consultations.
🔹 Third-Party Contracts & Acknowledgements: Issuers using outsourced services must maintain responsibility for redemption, communications, and compliance, with formal trust acknowledgement letters from third-party asset holders.
The FCA is pushing for proactive, proportionate regulation—focusing supervisory efforts on firms posing the greatest risk, while supporting innovation and clarity in an evolving market.
📌 Why it matters: With most UK consumers currently using overseas crypto custodians, the FCA's move is both protective and pre-emptive—aimed at setting global standards while safeguarding the UK’s digital asset space.
💼 How We Help: At Compliance Consultant, we guide firms through FCA authorisations, crypto registration, governance reviews, wind-down plans, and tailored training, ensuring you're never caught off guard.
🎙️ Tune in to hear what these changes mean for your business—and how to stay ahead of the compliance curve.
📅 Book a Discovery Call now: [https://bit.ly/CCDiscovr](https://bit.ly/CCDiscovr)