UK FCA Seeks Public Feedback on Stablecoin and Crypto Custody Rules

A Milestone Towards End-to-End Crypto Regulation On May 28, the UK Financial Conduct Authority (FCA) initiated public consultation for proposed new regulations on stablecoins and crypto custody institutions. This is a landmark step in the UK approach towards crypto regulation. David Geale, executive director of the FCA, emphasized the agency’s double obligation to market trust and innovation. “We need to strike a balance in favor of a sector which permits innovation and is based on market integrity and trust,” Geale said. Maintaining Stablecoins Stable The regulations as proposed would make sure that the stablecoins that are regulated cannot lose value and be transparent on how the backing assets are handled. The issuers, as proposed by the FCA, must allow for redemption on par value and maintain reserves with independent custodians. The consumers must be transparently informed on how the reserves are handled, and the redemptions must be settled at the end of the next business day after a successful request. The Bank of England will also help regulate stablecoins, with a supportive consultation being released on stablecoins at systemic scale. Enhancing Crypto Custody Protection In another paper, the FCA outlined crypto custody firms’ regulations. These include new safeguarding requirements to ensure digital assets are secure and accessible. Custody businesses must mitigate risks of loss or access failure and have systems in place that maintain consumer confidence and asset integrity. The requirements aim to mitigate the potential for business failures in the crypto custody sector to have a knock-on effect. Towards a UK Crypto Leadership Role These regulatory steps are part of broader efforts by the UK government to develop a “comprehensive regulatory regime” for crypto, as highlighted recently by Chancellor of the Exchequer Rachel Reeves. The objective is to establish the UK as a top digital finance center. Future regulation of crypto in the UK will be shaped by public comment on the FCA’s consultation, establishing a regulatory framework that supports innovation alongside the protection of consumer interests.

Source: BTC Pulse