On 28 May 2025, the FCA published a consultation paper outlining its proposed prudential rules for firms that issue qualifying stablecoins and safeguard qualifying cryptoassets (CP25/15). Interestingly, CP25/15 also sets out a glimpse of the future as it will apply to other types of solo regulated entities as well. Amongst other plans detailed in CP25/15, the FCA has notably proposed to:
- simplify the existing MIFIDPRU framework by introducing an integrated prudential sourcebook (referred to as COREPRU), which would then be supplemented by sector-specific sourcebooks (including a sourcebook specifically for cryptoasset firms); and
- introduce (i) an own funds requirement and (ii) liquid assets requirement for in-scope cryptoasset firms, both of which appear to be closely aligned with the equivalent MIFIDPRU requirements.
The FCA also published a second consultation paper on 28 May 2025 which sets out its proposed rules and guidance for the activities of issuing qualifying stablecoins and safeguarding qualifying cryptoassets (CP25/14). We will be publishing a separate blog post on CP25/14, so stay tuned for that.
Simplification of prudential requirements
As part of its efforts to make the existing prudential framework more accessible and consistent for solo regulated FCA firms, the FCA plans to create an integrated prudential sourcebook which will be referred to as COREPRU. The COREPRU sourcebook will establish common prudential requirements that are applicable to all in-scope firms. Sector-specific sourcebooks will then be introduced to build on COREPRU’s common requirements. Overall, this seems like a sensible approach, not least as there will be firms subject to multiple sector-specific sourcebooks, and it also appears that the FCA is seeking to reduce the impact of a change to this approach, as many of the draft provisions of COREPRU seem similar to existing provisions in MIFIDPRU.
Initially, only cryptoasset firms will be subject to COREPRU. However, the FCA plans to move other types of regulated firms into the scope of COREPRU at a later date. We expect that process to involve stripping back the existing MIFIDPRU requirements and reducing duplication between the COREPRU and MIFIDPRU rules.
Additionally, CP25/15 includes proposals related to a cryptoasset firm-specific sourcebook, CRYPTOPRU. Initially, the CRYPTOPRU sourcebook will only be applicable to firms that carry on the new regulated activities of (i) issuing qualifying stablecoins or (ii) safeguarding qualifying cryptoassets, although the proposed CRYPTOPRU rules and guidance set out in CP25/15 may also be relevant to firms seeking authorisation and regulation for other regulated cryptoasset activities. The FCA will consult separately in the future on the remaining prudential requirements for firms that carry on other regulated cryptoasset activities.
Own funds requirement for CRYPTOPRU firms
Under the current MIFIDPRU requirements, an in-scope firm must maintain own funds that are at least equal to the highest of:
- its permanent capital requirement (PMR);
- its fixed overheads requirement (FOR); or
- its K-factor requirement (KFR).
An equivalent own funds requirement will be imposed under COREPRU and CRYPTOPRU, with some modifications to reflect the unique characteristics of cryptoasset firms. CRYPTOPRU firms will be required to maintain own funds that are at least equal to the highest of their PMR, FOR or KFR – i.e., the same as MIFIDPRU firms, with the difference being how to calculate the KFR.
CP25/15 confirms that instances will arise where a firm is in scope of both CRYPTOPRU and MIFIDPRU. For example, a qualifying stablecoin issuer may also be conducting investment business in the traditional financial space as a MIFIDPRU investment firm. That raises the question of how such firms should calculate their PMR, FOR and KFR. The FCA outlines how firms in scope of both prudential regimes would be expected to comply with the own funds requirements under both sourcebooks, which we have included below.
PMR
Under the FCA’s proposals, CRYPTOPRU firms will be required to meet a PMR on an ongoing basis, depending on the activities carried on. The PMR for issuing a qualifying stablecoin is currently proposed to be £350,000 and the PMR for safeguarding of qualifying of cryptoassets is proposed at £150,000. The FCA will consult on the appropriate PMR for each of the remaining regulated cryptoasset activities in the future. This approach is aligned with MIFIDPRU, which has already established appropriate PMRs for each of the non-cryptoasset regulated activities.
A CRYPTOPRU firm should operate with a minimum level of own funds based on the cryptoasset services and activities it has permission to undertake. Where a firm undertakes a combination of regulated cryptoasset activities, the higher PMR would apply. As an extension of that same logic, for a firm that is subject to both CRYPTOPRU and MIFIDPRU, the relevant PMR would be the highest PMR across the two applicable sourcebooks when considering all regulated activities that the firm undertakes.
FOR
The FCA has proposed that CRYPTOPRU firms should meet a FOR on an ongoing basis. Generally speaking, a firm’s FOR will be equal to one quarter of its “relevant expenditure” in the previous year. The FOR will be calculated consistently across both sourcebooks, so this should not be a significant change for firms that are already in scope of MIFIDPRU.
KFR
The third and final component of a CRYPTOPRU firm’s own funds requirement will be the variable activity-based requirement (i.e. the KFR). MIFIDPRU establishes the relevant K-factors for non-cryptoasset regulated activities and consistent with the approach prescribed under MIFIDPRU, which K-factors apply to an individual CRYPTOPRU firm will depend on the activities it undertakes.
CP25/15 only sets out the proposed K-factor in respect of (i) qualifying stablecoins in issuance and (ii) qualifying cryptoassets safeguarded, although the FCA will consult on K-factors for the remaining regulated cryptoasset activities in the future. Notably, CP25/15 proposes that the measurement of a firm’s K-factor in respect of its qualifying cryptoassets safeguarded must include any cryptoassets that are appointed by or to a third-party custodian for the purposes of safeguarding.
Where a firm conducts multiple regulated cryptoasset activities, the overall K-factor would be the sum total of the K-factors for each relevant cryptoasset activity undertaken by the firm. Similarly, firms subject to both CRYPTOPRU and MIFIDPRU will calculate their KFR by aggregating the total of all K-factor requirements applicable across the different sourcebooks.
Liquid asset requirements
In addition to the newly proposed own funds requirements for cryptoasset firms, the FCA has also proposed that in-scope firms should meet certain liquid asset requirements. To that end, CP25/15 sets out out the minimum liquidity requirements applicable to CRYPTOPRU firms and it also specifies the types of core liquid assets firms may hold to satisfy those liquidity requirements. The proposed COREPRU (i) basic liquid asset requirements (BLAR) and (ii) core liquid asset requirements both appear to mirror the equivalent MIFIDPRU requirements. The FCA has stated that it aims to consult on an ICARA-type process for CRYPTOPRU firms in a future consultation.
However, in addition to the BLAR the FCA has proposed an additional liquidity requirement that would address the unique liquidity needs of qualifying stablecoin issuers. Namely, CRYPTOPRU would introduce an issuer liquid asset requirement (ILAR). Qualifying stablecoin issuers would satisfy the ILAR by holding the appropriate sum of on demand deposits; that sum would be calculated in accordance with the detailed CRYPTOPRU rules. The ILAR is an example of a bespoke requirement that sector-specific prudential sourcebooks could impose on relevant firms to accommodate the unique characteristics of those types of firms.
