FCA Crypto Consultations: What Stablecoin and Custody Firms Need to Know

On 28 May 2025, the UK financial regulator, the Financial Conduct Authority (FCA), published two consultation papers, CP25/14 and CP25/15. Together, they mark a major step in the UK’s progression towards a comprehensive regulatory framework for digital assets, as part of the UK's wider digital asset roadmap. This article focusses on the practical implications of the proposed measures.

Stablecoin Rules: What does CP25/14 mean for issuers and custodians?

CP25/14 sets out the FCA’s proposed rules for the:

• issuance of qualifying fiat-backed stablecoins (QFSs) used for UK payments; and
• safeguarding of QFSs on behalf of clients (including private key management).

Under the proposals:

• Authorisation: Firms carrying out these activities must be authorised under Part 4A of the Financial Services and Markets Act (FSMA) 2023.
• Trust structures for backing assets: Stablecoins must be fully backed by high-quality, liquid, fiat (i.e. conventional currency) -denominated assets. These backing assets must be held in a statutory trust and managed by a separate, independent custodian.
• Redemption rights and transparency obligation: Users (i.e. holders) must have the legal right to redeem their stablecoins at par value on demand directly. This means that issuers must publish (i) redemption policies (ii) asset breakdowns and (iii) value methodologies.
• Custodian obligations: Custodians must segregate client assets, hold them on trust, maintain detailed records and provide appropriate disclosure to clients. 

The proposals differentiate between systemically important stablecoins and those with more limited use, and intentionally exclude unbacked or algorithmic tokens from the current scope.

New Prudential Rules: What does CP25/15 mean for crypto firms?

CP25/15 focuses on financial resource requirements for firms issuing stablecoins or safeguarding cryptoassets. These prudential rules are meant to ensure firms can operate safely and withstand periods of stress.

The FCA’s key proposals include:

• Capital requirements: made up of the higher of:
  • A permanent minimum capital threshold (£350k for issuers; £150k for custodians),
  • A fixed overheads requirement (FOR) based on annual expenditure,
  • Activity-based ‘K-factor’ requirement, that scale with the firm’s crypto exposure.
• Liquidity requirements and stress planning: Firms must liquidity buffer (cash and high quality liquid assets) with stress testing frameworks to simulate outflows and adverse events. 

Although the framework mirrors elements of the Investment Firm Prudential Regime (IFPR), it has been tailored to address the specific risks associated with crypto markets.

Notably, the FCA signals that this may be the first phase of a wider reform of prudential regulation, which could eventually extend beyond crypto-focused firms.

Next steps for getting ahead of the new rules

As the consultation period closes on 31 July 2025, any firm involved in stablecoin issuance or crypto custody can use this time to prepare for potential new authorisation requirements, compliance obligations, and operational changes that may follow when the rules are finalised. This can be done by taking the following steps:

• Assess whether your business activities are captured by the FCA’s proposed scope.
• Consider the need for FCA authorisation and begin mapping out the application process if required.
• Calculate your capital and liquidity requirements.
• Enhance governance arrangements, with a focus on independent risk oversight and compliance capabilities.
• Revisit client asset safeguarding practices to ensure they meet the proposed standards.
• Review contractual documentation to ensure consistency and alignment with the new redemption and custody rules.
• Engage with the consultation process by submitting a response to the FCA consultation paper, especially on areas that may benefit from further clarity or adjustment.

These consultation papers together set out a clear and rigorous regulatory perimeter for stablecoin issuance and custodial services, offering a hope of clarity long sought after by market participants: both established crypto-native firms and those wishing to enter the market. But the clarity comes with operational and financial demands that will be onerous to meet.

Firms that can adapt early will be better positioned for success as regulation matures. If you would like to understand how these changes may affect your firm or would like assistance in preparing a consultation response, our Financial Services team is here to help.