New FCA Crypto Custody Rules Would Force Firms to Upgrade Security

Regulators in the UK have taken a step closer to formal crypto oversight. The Financial Conduct Authority (FCA) has opened consultations on new rules governing stablecoins and the custody of digital assets. The proposals are part of an effort to establish a safer, more transparent environment for crypto services, while still enabling innovation in the sector.

A New Phase in Crypto Regulation

The FCA’s latest move targets firms issuing stablecoins, crypto assets pegged to fiat currencies, and those safeguarding consumer crypto assets. The proposed framework would require issuers to maintain stable value through appropriate asset backing and ensure transparency in how these assets are managed.

Custodians would need to keep crypto assets secure and accessible, minimizing the risks of customer loss or delayed access.

According to the FCA, the proposals stem from months of consultation, roundtables, and feedback from earlier discussion papers. The regulator emphasized the importance of building a system that fosters innovation while maintaining integrity and trust in the market.

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“We welcome the proposals the FCA has published as part of building the UK’s stablecoin regime. For those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year, including responding to industry feedback around allowing some return on backing assets,” commented Sarah Breeden, deputy governor for financial stability at the Bank of England.

“We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime, including how firms transition within the regime,” she added.

Collaboration With the Bank of England

The FCA's approach is part of a broader regulatory initiative involving the Bank of England, which is preparing a parallel consultation focused on stablecoins expected to reach systemic scale.

The Bank of England will reportedly publish its own consultation later this year, potentially addressing the industry’s calls to allow returns on the assets backing certain stablecoins.

Stablecoins have the potential to make cross-border payments faster and cheaper by leveraging blockchain technology. Recognizing this potential, the FCA plans to add stablecoins to its innovation services, potentially giving fintech firms new tools to explore compliant offerings within a supportive regulatory environment.

The FCA’s consultation follows the UK Treasury’s draft legislation issued in April 2025. Stakeholders can submit feedback on the proposals until 31 July 2025. The regulator plans to finalize and publish the rules in 2026.

As the UK builds out its stablecoin regime, the current consultations mark a crucial point in setting the direction for crypto asset firms operating in the country.