On 28 May 2025, the Financial Conduct Authority (FCA) published a consultation setting out its proposed rules for the two newly regulated cryptoassets activities: the issuance of qualifying stablecoins and the safeguarding of qualifying cryptoassets (CP25/14). These proposals form part of the UK’s broader regulatory roadmap for digital assets and follow the Treasury’s near-final statutory instrument published in April 2025, which amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and, among other things, brings the activities of issuing qualifying stablecoins and safeguarding qualifying cryptoassets within the UK regulatory perimeter (see our briefing for more information). Together with Consultation Paper 25/15, which outlines the prudential requirements proposed for certain cryptoasset firms (see our blog post on CP25/15 here), CP25/14 represents a significant step in the FCA’s efforts to bring clarity and create a predictable framework for the regulation of cryptoassets in the UK.
A regulatory framework for stablecoin issuers and custodians
Under the proposed framework, firms that issue qualifying stablecoins or safeguard qualifying cryptoassets will need to be authorised by the FCA. The FCA’s proposals in CP25/14 set out proposed rules and guidance for firms carrying on the activities of issuing a qualifying stablecoin or safeguarding qualifying cryptoassets. The FCA has stated that there will be a further consultation on proposed cross-cutting conduct and firm standards requirements (e.g., on governance, operational resilience and the Consumer Duty) that will apply to firms carrying on these activities and the other types of cryptoasset regulated activities.
Stablecoin issuance: key requirements
A central focus of the consultation is the requirement for stablecoin issuers to maintain a robust system of asset backing where the stablecoin is backed by a single fiat currency. The FCA is aware that its proposed rules in CP25/14 may not be appropriate for multi-currency stablecoins and is seeking views.
Among the proposals, the FCA proposes that issuers must ensure that every stablecoin in circulation is backed 1:1 by a pool of low-risk, liquid assets, with the “backing assets” held on behalf of stablecoin holders under a statutory trust. The initial proposal was that these backing assets must consist of short-term government debt and cash deposits, although given feedback from its discussion paper, the FCA is proposing to allow a small number of additional permissible assets, such as longer-term government debt and Public Debt CNAV Money Market Funds, subject to additional conditions and FCA notification. To ensure immediate liquidity, at least 5% of the backing assets must be held in on-demand deposits. Issuers using the expanded assets will also be subject to a “Backing Asset Composition Ratio”, which mandates a minimum proportion of core assets in the overall pool.
The FCA places strong emphasis on risk management and safeguarding and is proposing a regime based on the Client Assets regime (CASS). Backing assets must be segregated from the issuer’s own funds and the FCA is proposing to impose a statutory trust for the benefit of stablecoin holders (this is similar to the position for client money, as well as the FCA’s proposals for payment services and e-money which we posted about last year). These assets must be safeguarded by a third party that is unconnected to the issuer. Issuers will be required to perform daily reconciliations and valuations of the backing asset pool, and to act promptly to correct any discrepancies. The FCA also proposes that issuers appoint a CASS Oversight Officer and submit a Client Money and Assets Return, reinforcing accountability and oversight.
Redemption rights are another key area of focus. The FCA proposes that all holders of qualifying stablecoins must be able to redeem their tokens at par value with the reference fiat currency, with payment orders placed by the end of the next business day following a valid request. Issuers must either re-back or burn them within 24 hours to maintain the integrity of the backing asset pool. In exceptional circumstances, such as operational disruptions, issuers may temporarily suspend redemptions but must notify the FCA and resume redemptions as soon as reasonably possible.
Consumer communications
Consumer communication is a recurring theme throughout the consultation. Between other things, stablecoin issuers must provide clear, accurate, and timely information about the composition and value of the backing asset pool, the redemption process, and the involvement of third parties. They must also explain how they ensure that the number of stablecoins in circulation is always matched by an equivalent value of backing assets. This includes describing the reconciliation process and any independent audits or checks that are conducted.
Custody of cryptoassets: key proposals
In addition to the rules for stablecoin issuers, CP25/14 sets out detailed proposals for firms that safeguard qualifying cryptoassets. Again, the FCA is proposing a regime based on the existing CASS framework, with bespoke requirements to account for the characteristics of cryptoasset custody.
For example, cryptoasset custodians will be required to hold client assets separately from their own and under a statutory trust. Where third-party custodians are used, they must be unconnected to the firm and meet equivalent safeguarding standards. Daily reconciliations must be conducted using internal records, blockchain data, and third-party records to ensure consistency and accuracy.
Operational resilience is a key requirement for custodians. Firms must implement strong access controls and security measures to protect private keys and access credentials. This includes multi-factor authentication, secure key storage, and access logging. They must also maintain robust business continuity and disaster recovery plans to ensure uninterrupted service in the event of cyberattacks or system failures. Governance and risk management frameworks must be in place, with board oversight and regular risk assessments.
Similar to stablecoin issuers, transparency is important for cryptoasset custodians. Firms must provide clients with clear information about how their assets are safeguarded, including the use of third parties, the risks involved, and the procedures in the event of insolvency. Written agreements must outline the terms of custody, including the rights and obligations of both parties and the procedures for accessing or transferring assets.
Next Steps
The FCA is accepting feedback on CP25/14 until 31 July 2025. Firms involved in stablecoin issuance or cryptoasset custody should review the proposals carefully and assess what they would need to do to comply with the new requirements, in order to identify what is and is not feasible. The proposed rules represent a significant progress in the UK’s approach to cryptoasset regulation, aiming to balance innovation with robust consumer protection and market integrity. As noted above, there will also be at least one further consultation, covering broader “conduct and firm standards”.
