The Financial Conduct Authority (FCA) has unveiled new proposals for issuing stablecoins, which aim to support innovation in the UK cryptoasset sector and help UK cryptofirms compete internationally.
New FCA crypto and stablecoin proposals would require firms providing crypto custody services, who have responsibility for keeping consumers’ crypto safe, to ensure they are effectively secured and can be easily accessed at any time. The proposals also hope to reduce the likelihood of crypto firms failing in the UK.
The new proposals follow HM Treasury’s draft legislation published in April 2025, with the deadline for feedback set at 31 July 2025. Following this consultation period, the financial regulator plans to implement the new ruleset in 2026.
To this end, the FCA revealed it plans to work closely with the Bank of England on the upcoming regime to ensure a clear pathway in regulation for stablecoins.
The news comes as around 12 per cent of UK adults now own cryptoassets, according to an FCA survey carried out by YouGov, up from 10 per cent in previous findings. Just over a quarter (27 per cent) of cryptoasset users who responded to this survey had bought stablecoins.
In its consultation paper, the FCA revealed that the proposals are ‘intended to support innovation and allow cryptoasset firms that set up in the UK to compete internationally’. They also look to ensure that appropriate protections are in place for consumers, enabling them to access products that meet their needs and provide fair value.
But are these proposals comprehensive enough? Do they provide enough clarity? Not all industry experts seem to think so. To better understand the consensus and find out exactly what issues may remain with the proposed rules, we sought out industry feedback.
A positive step
For Matthew Osborne, UK and Europe policy director at Ripple, the proposals represent an encouraging step towards providing the necessary regulatory clarity to drive stablecoin progress in the UK.
He explains: “We welcome the UK Government’s ambition to be a world leader in digital assets. Chancellor Rachel Reeves was spot on – clear, forward-looking regulation is key to unlocking innovation and driving growth, and this draft legislation is a positive step in that direction.
Matthew Osborne, UK and Europe policy director at Ripple
“The UK’s second-mover advantage gives it the opportunity to build an agile, internationally competitive crypto framework, which shows that it is open for business.
“We’re especially encouraged by the proposed stablecoin regime, which recognises the global nature of blockchain by allowing overseas-issued tokens, as well as the proposed UK-US sandbox. International cooperation like this is critical to scaling the real-world benefits of digital asset technology.
“Thriving crypto hubs like Singapore and the UAE show what’s possible when ambition meets urgency. We look forward to Government and regulators working at pace to get this rulebook live, providing the regulatory clarity that is essential for serious institutional participation in the sector and the UK’s continued global leadership in financial services.”
Quick off the blocks
“The FCA’s proposed stablecoin regulations mark a significant and welcome step forward in establishing a safe, trusted environment for stablecoin usage in the UK,” says Lorien Carter, market research analyst at Juniper Research.
Lorien Carter, market research analyst at Juniper Research
“The emphasis on robust consumer protections, such as full reserve backing and guaranteed par redemption, sets a high bar for recoverability and resilience standards. These efforts to reduce the risk and impact of depegging will go a long way toward increasing market confidence and encouraging mainstream adoption.
Carter believes that, while the framework is set be implemented quickly, the UK must move quickly, or risks falling behind other competing countries. “The regulatory framework is expected to come into force in 2026, a timeline that may prove challenging for firms to meet as they adapt to new compliance standards,” she adds. “However, considering the swift movement of the global stablecoins market, it is vital that the UK moves quickly to foster innovation and keep a competitive edge.
“This timing is strategic, enabling the UK to remain competitive as jurisdictions like the EU, Hong Kong, and the US move forward with their own regulatory regimes. In the context of MiCA’s implementation in Europe, Hong Kong’s new stablecoin licensing bill, and the momentum behind the GENIUS Act in the US, the FCA’s announcement is both ambitious and necessary.”
Time to encourage trial and testing
“To encourage innovation, there should be space for early-stage testing and development,” adds Bilal Khaled, director of trading at D24 Fintech Group. “New and promising stablecoin projects could benefit from a special trial period, where some rules are eased temporarily under careful oversight.
Bilal Khaled, director of trading at D24 Fintech Group
“This approach would let startups experiment and create without having to meet all regulatory requirements right away, helping real innovation grow instead of just focusing on compliance.
“In fact, several countries have already started regulating stablecoins. Compared to other regions, the UK’s approach is in balance. The well-known EU’s MiCA regulation is strict and detailed, but it can be complex to follow. Singapore’s MAS framework is another one that is simple and fast, though it applies lighter rules to smaller players. The UK offers a mix of clear rules, flexibility, and strong protections, aiming to support innovation while keeping users safe.
“We’ve worked with governments in three countries to successfully develop stablecoins and stablecoin infrastructure, and this proposal represents an alignment from the UK government with market trends we’ve seen firsthand.
Too cautious, too unimaginative, and too far behind?
However, not all industry participants are convinced that the proposals put forward exactly what is needed to put the UK on the right track. Daniel Taylor, head of policy at digital-assets-as-a-service platform Zumo, warns that, while they create a positive opportunity, these proposals could add to the confusion surrounding stablecoins.
Daniel Taylor, head of policy at digital-assets-as-a-service platform Zumo
“The FCA’s proposals present a huge opportunity: to create the first gold-plated, ‘made in the UK’ stablecoin that delivers on what is so conspicuously lacking: consumer access to high-quality, sterling-linked stablecoins in an almost entirely dollarised stablecoin economy.
“At the same time, this is, by all accounts, a confused implementation. The decision to restrict requirements to stablecoins issued from within the UK diverges from other key jurisdictions, and leaves overseas issuers out of scope. Not only may consumers struggle to distinguish UK and overseas-issued stablecoins as a result, but it also potentially compromises issuers’ willingness to subject themselves to onerous UK requirements.
“Equally puzzling is the decision to designate stablecoins as investments rather than payments. As a result, consumers will be confronted with severe financial promotions warnings (‘Don’t invest unless you’re prepared to lose all the money you invest!’) even if they want to use stablecoins for payment purposes. Those seeking to process stablecoin payments may find themselves needing to acquire dealing-type authorisations.
“There is no little irony that the announcement to treat stablecoins as investments and not payments came the same week as Mastercard and Visa announced global stablecoin payment capabilities. In many ways, it seems emblematic of the UK – too cautious, too unimaginative, too far behind.”
Impending regulatory headaches
Martin Dowdall, partner and financial services regulatory specialist at global law firm Taylor Wessing, also highlights the potential for confusion and urges the FCA to provide more clarity.
Martin Dowdall, financial services regulatory specialist at Taylor Wessing
“It has been difficult for firms to plan for UK expansion, and we have seen providers prioritise their EU plans, partly because of greater regulatory certainty provided by MiCAR. Exempting firms from authorisation when there is a UK-authorised intermediary between them and consumers is a good move and hopefully means we avoid the liquidity problems we saw in the early days of MiCAR.
“However, there are some significant issues with the proposed rules. One is the definition of ‘qualifying stablecoins’. The definition makes it very unclear where the line is between stablecoins and e-money. This is problematic because issuers of stablecoins and e-money will be subject to different regulatory obligations.
“Exempting stablecoins from payment services regulation may sound helpful, but it is odd that a payment service provider providing virtually identical services in both fiat and stablecoin will be regulated for the former but not the latter. This may cause confusion for customers of these services about what protections they benefit from.
“We need more clarity on the treatment of fiat-to-crypto exchange services in the context of payment transactions. A spot FX in the context of a payment service is not regulated, but will a payment service provider need to be authorised to effect the exchange of fiat for stablecoin? I would like to see an exclusion for such activity. Otherwise, firms providing payment services in stablecoin will potentially have a major regulatory headache.”
A strong foundation, but work to be done
“These measures are likely to boost confidence among institutions and users alike, particularly in light of past volatility in the sector,” explained Elena Tzvetinova, chief operating officer at AI-powered crypto compliance and due diligence platform Eunice.
Elena Tzvetinova, chief operating officer at Eunice
“However, the proposals also raise important questions about how innovation will be balanced with regulation. Stablecoins are not simply digital analogues of existing money – they are flexible digital tools that can be programmed to enable new types of financial transactions and services. A regulatory framework that views them only through a traditional lens risks limiting their full potential.
“There is also a need for greater clarity on how the rules will apply to non-UK issued stablecoins, especially those widely used within decentralised applications and cross-border financial flows. In a global and interoperable ecosystem, localised rules must also be compatible with international standards.
“Overall, the FCA’s proposals are a strong foundation. The challenge now is to ensure the final rules are proportionate, technology-aware, and adaptable enough to evolve alongside the market they aim to support. To do so, policymakers should leverage the UK’s expertise in financial services, law, and emerging technology to craft regulations that are not only robust but also fit for purpose.”
The post Are New FCA Stablecoin Proposals Too Cautious and Confusing? Industry Reacts appeared first on The Fintech Times.
