The British financial regulator FCA is cutting the stablecoin capital requirement from 2 to 1 percent of the issued volume. With the final rulebook, the United Kingdom thus gains its first comprehensive legal framework for crypto assets. This framework takes effect on 25 October 2027.
The Financial Conduct Authority (FCA) is the UK's financial market regulator. It also oversees the authorisation of financial service providers in the country. Since 2023, crypto financial promotion has also fallen within its remit, supplemented by registration against money laundering. Unlike the Bank of England, it mainly regulates market-related activities such as trading, custody and issuance. Previously, the regulator covered crypto firms in the UK only through money laundering rules. The legal basis of the new regime is the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026. Parliament passed this law in February 2026. Since then, the authority has consulted market participants on capital requirements, market abuse rules and operational standards. The authorisation window opens in September 2026, while preparatory meetings are already running from July 2026. Firms without authorisation by October 2027 may no longer operate as a registered crypto business thereafter.
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How industry feedback halved the stablecoin capital requirement
The FCA halved the so-called K-SII coefficient from 2 to 1 percent of the total issued stablecoin volume. The coefficient determines how much equity an issuer must hold relative to the circulating token supply. For large issuers, the halving therefore means a significantly lower capital commitment. A prior consultation was decisive for the correction. In it, the industry rated the original 2 percent threshold as internationally uncompetitive. The authority consequently responded directly to the feedback and revised the value downward.
"The feedback we received was that we had set it a little too high." - David Geale, Executive Director for Payments and Digital Finance, FCA
Beyond the capital cut, the final rulebook contains several relaxations compared with the consultation draft. For example, issuers gain more time in certain cases to return funds during redemptions. The FCA also dropped some public disclosure obligations, which reduces the ongoing reporting burden for issuers. Furthermore, it adjusted the trading rules for crypto exchanges to better reflect how the markets actually function. As a result, the requirements align more closely with the real market structure than the original draft did.
At the same time, the authority standardised the risk requirements for trading platforms. A uniform net risk position requirement of 40 percent will apply to eligible crypto assets in future. This replaces an earlier two-tier system that set different thresholds depending on the asset. The counterparty default volatility adjustment also stands at 40 percent. Thus, the same risk buffer applies to all approved tokens, regardless of their previous risk class.
Why the FCA rules cover only sterling stablecoins
The FCA issuer rules apply exclusively to sterling-denominated stablecoins. These are digital tokens with a fixed peg to the British pound. The global stablecoin market, however, is dominated by dollar tokens. Within this market, the sterling segment therefore covers only a small share. Large dollar stablecoins consequently do not fall under the FCA issuer regime. As a result, the largest part of the volume remains outside the FCA's direct issuer supervision for now.
Systemically important stablecoins fall under a different supervisor. They could see wide use in payments and therefore come under a stricter regime of the Bank of England. Both authorities ultimately coordinate the transition between their responsibilities. For the remaining issuers, the FCA continues to require full 1:1 backing of the issued volume. These reserves must sit in eligible liquid assets. This backing should ensure redemption at full face value at all times.
In addition, a statutory trust must hold the reserves for the holders. Custody takes place with an independent third party outside the issuer group. Surplus assets in the safeguarding pool are capped at a maximum of 5 percent. This cap prevents the issuer from oversizing the reserve pool.
Who must seek authorisation by February 2027
The rulebook covers a broad range of regulated activities. These include crypto trading platforms, so-called QCATPs, as well as custodians and stablecoin issuers. Staking providers and credit and lending businesses also fall under supervision. Furthermore, the framework captures certain DeFi firms with an identifiable controlling entity. Particularly relevant is the treatment of prior registrations. An existing AML registration under the Money Laundering Regulations does not automatically convert into a licence. Affected firms must therefore go through the full authorisation process. They must apply for a new authorisation instead of building on their existing registration.
The authorisation window opens on 30 September 2026 and closes on 28 February 2027. Already from July 2026, the FCA offers preparatory meetings through the PASS service. Such requests have been possible since May 2026. An early application therefore gives firms more planning certainty. Until the regime takes effect in October 2027, supervision remains limited to financial promotion and money laundering requirements.
Operationally, the rulebook tightens the requirements noticeably. At the same time, annual stress tests become mandatory for all regulated firms in future. A market abuse framework also emerges with rules against insider trading and market manipulation. These rules transfer standards from traditional securities trading to crypto exchanges. According to The Block, large platform operators must additionally set up onchain monitoring.
