Bitcoin Magazine

UK Sets Landmark Crypto Rules in Race to Become Global Hub

The UK’s Financial Conduct Authority published a landmark crypto regulatory framework this week, establishing capital requirements, market abuse controls, and stablecoin standards for the country’s digital asset industry ahead of a mandatory authorization regime that takes effect in October 2027.

The package represents the most expansive expansion of the FCA’s oversight in years. Legislation passed in February 2026 brought cryptoassets within the regulator’s remit for the first time.

The framework covers a wide range of activities: crypto trading platforms, custodians, stablecoin issuers, lending and borrowing providers, staking firms, and certain decentralized finance firms where an identifiable controlling entity exists.

Under the new regime, all regulated crypto firms must meet prudential requirements, including minimum capital buffers and annual stress tests. Unlike banks, which receive specific scenarios from the Bank of England, crypto companies will design their own tests based on internal risk models and submit results to the FCA each year. 

Each firm determines how much risk sits on its balance sheet — a figure that sets the level of capital it must hold.

In other more layman terms, crypto firms operating in the UK must hold capital against their riskiest assets and run annual stress tests of their own design. This is a looser standard than banks face, but a first for the sector.

The framework introduces market abuse rules covering insider trading and market manipulation, areas where the crypto sector has faced scrutiny but limited enforcement action. Large trading platform operators will follow an industry-led monitoring approach, while the scope of mandatory on-chain surveillance has been narrowed from an earlier draft. 

Eligible cryptoassets admitted to UK qualifying trading platforms will face a single 40% net risk position requirement and a 40% counterparty default volatility adjustment — replacing a two-tier classification system proposed during consultation.

Stablecoin and crypto concessions

The FCA made concessions to stablecoin issuers after pushback from the industry. The capital coefficient for stablecoin issuance was cut to 1% of the aggregate value of issued tokens, down from 2% in the original proposal. 

The reduction is designed to keep the UK competitive with the European Union’s MiCA regime and with emerging US stablecoin legislation, both of which are drawing crypto firms to rival jurisdictions.

Stablecoin firms will be allowed to hold a cash surplus of up to 5% inside their backing asset pools to manage liquidity pressures. Redemption forecasting obligations for backing assets were removed, and limited intragroup custody arrangements are permitted subject to additional safeguards.

The FCA’s authorization window

Crypto firms must obtain FCA authorization to operate under the new regime. Existing anti-money laundering registrations will not convert to authorization under the new rules — firms must apply fresh. The application window opens September 30, 2026 and closes February 28, 2027. The FCA will offer pre-application support meetings from July to help firms prepare submissions.

Until the regime takes effect on October 25, 2027, the regulator’s oversight of crypto firms remains limited to financial promotions and anti-money laundering controls.

David Geale, the FCA’s executive director of payments and digital finance, called the framework a milestone. “We’ve created a framework that doesn’t force firms to choose between regulatory certainty and room to innovate,” he said. “For consumers, it means firms will be held to similar standards to other financial providers, though we can’t regulate away risk.”

The framework arrives as the global race to regulate crypto heats up. The EU’s MiCA regime is in force, and the US is pushing through stablecoin legislation under President Donald Trump, whose administration has been a driver of crypto’s legitimization. The UK is positioning its regime as a stable, innovation-friendly alternative for firms weighing where to base their operations.

Source: BitcoinMagazine