FCA Proposes New Stablecoin Rules Amid Industry Debate

The UK Financial Conduct Authority (FCA) released crucial consultation papers targeting stablecoin regulation and crypto custody frameworks on May 28, 2025.

The proposals aim to ensure market stability, yet industry responses signal potential disruptions and regulatory challenges, with the consultation period set to close on July 31, 2025.

FCA Unveils Stablecoin and Custody Regulation Plans

The UK Financial Conduct Authority’s new consultation papers address critical issues surrounding stablecoin issuance and crypto custody. Released on May 28, 2025, they aim to establish a clear regulatory path focused on market stability and participant compliance.

Collaborating with HM Treasury and the Bank of England, the FCA targets non-systemic stablecoins and crypto custody through CP25/14 and CP25/15 papers. This involves gathering insight from industry stakeholders for tailored regulatory frameworks.

Potential Regulatory Shifts for Stablecoins and Custody

New regulations could shift market dynamics towards licensed stablecoin issuers and custody providers. Industry stakeholders discuss potential enhancements in compliance but express concerns over possibly stifling innovation due to stringent regulatory requirements.

Financial and regulatory changes may redirect market share to firms carrying FCA approval. The new measures, focusing on fiat-referenced stablecoins, might influence DeFi and exchange platforms, encouraging a gradual movement towards compliant operations. “The FCA continues to work closely with the Government, international partners, industry and consumer groups to shape a proportionate crypto regime.”

Lessons from 2023: Compliance versus Innovation

Previous actions, like the 2023 stablecoin discussion paper, led to increased compliance and market adjustment. Establishing clear legitimacy allowed the adoption of regulated operational models, spurring growth but causing difficulties for unregulated entities.

Based on Kanalkoin analyses, the current FCA approach could stimulate adoption within regulated frameworks while causing possible exclusions. Like past developments, the situation may favor firms ready to adapt, altering market and technology landscapes significantly.

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