The UK's FCA Eases Stablecoin Rules Following Industry Backlash

The UK’s Financial Conduct Authority (FCA) has now performed a significant about-turn on its stablecoin proposals, halving its planned capital requirements from 2% to 1%.

This move follows a sustained period of industry backlash, with David Geale, the FCA lead for payments and digital finance, conceding that the original demands were likely too high for the current market.

Beyond the capital buffer reduction, the regulator has also softened its stance on redemption timelines and public disclosure obligations.

The rules are set to take effect in October 2027.

However, these regulations focus only on stablecoins pegged to the British pound, which represent a fraction of the global market. The Bank of England has mirrored this pragmatism, recently diluting its own unpopular proposals for systemic stablecoins.

Whether these adjustments suggest that the FCA is finally listening to market participants or trying to keep with the more crypto-friendly regime in the US is unclear.

Notably, the US rules drawn last year have avoided a rigid, one-size-fits-all capital requirement for stablecoin issuers.

The EU Remains Restrictive

The view from the EU, though, is far more heavy-handed and restrictive.

The Markets in Crypto Assets (MiCA) regulation, which came into force toward the end of 2024, sets own-funds requirements for significant stablecoin issuers as high as 3%, a point that has already drawn opposition from major players.

Tether, the largest global issuer, has famously distanced itself from the MiCA framework entirely due to these stringent demands.

The requirement for issuers to be authorised as traditional banks or Electronic Money Institutions, which in most EU countries are regulated by Central Banks rather than regulators, adds another layer of complexity.

The European Central Bank (ECB) has been a vocal detractor of stablecoins, with President Lagarde going so far as to call them a direct threat to the financial stability of the Eurozone and the monetary sovereignty of the Euro.

The ECB is preparing to launch the digital euro, its own state-backed competitor to stablecoin.

While the EU has started an official review of MiCA, meaningful changes to stablecoin rules still look unlikely, given the ECB’s stance.