Financial Conduct Authority – Written Evidence (STA0059)

Financial Conduct Authority Written Evidence: Growth and proposed regulation of stablecoins

Stablecoins, and other forms of tokenised money, present an opportunity to change how various aspects of finance work. They can bring additional features and functionality, driving efficiencies and increasing liquidity across the system.

As well as bringing opportunities they also present risks. Some of these can be addressed through domestic regulatory regimes, but others may need to be mitigated by the developing market, or through international standards. 

Regulatory regimes, in the UK and internationally, are shaping the development and use of stablecoins. The FCA is working to create an environment which allows stablecoins to be used safely, with trust and confidence, while allowing and promoting innovation so the functionality offered by stablecoins can be positively exploited.

Parliament recently passed legislation which brings cryptoassets into the FCA’s remit, via the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026. We are currently consulting on a comprehensive regime for the regulation of cryptoassets activities, including the issuance of UK stablecoins. The regime will be finalised shortly, and will come into force in October 2027, as set out in the legislation. The Gateway for applications for the new cryptoasset regime opens in September 2026. Firms can currently conduct cryptoasset business when registered with us under the MLRs, and we welcome responsible cryptoasset businesses to the UK.

In relation to stablecoin issuance, in November 2023 we published a discussion paper on regulating stablecoins. We received significant input from industry and other stakeholders, including consumer representatives, on these proposals.  We reflected on feedback, and subsequently consulted on our proposed rules for stablecoins in May 2025. This regime has been designed in line with our statutory objectives, continuous stakeholder feedback and our 2025-2030 strategy. Our proposed regime for stablecoin issuance sits alongside the Bank of England’s proposed regime for sterling-denominated systemic stablecoins.

We are working closely with the Bank of England to ensure firms can move from issuing an FCA-regulated non-systemic stablecoin to issuing a dual-regulated systemic stablecoin, smoothly. Achieving this will be key to encouraging stablecoins issuance in the UK. We have engaged with regulators and stakeholders around the world to consider regulation of stablecoins and have maintained a constant and fruitful conversation with industry throughout.

Future use of stablecoins as regulated payments within the UK will require changes to legislation. We are looking at all aspects of how regulation can help to facilitate the use of stablecoins, while mitigating the risks, and ensuring the consumers are appropriately protected.

1. How has the global market for, and the issuance of, stablecoins developed since 2014? How does the UK market compare to the US and the EU? 

Stablecoins[1] are a small but rapidly growing segment of the global cryptoasset market. As of 11 March 2026, the global stablecoin market capitalisation is approximately $320.6 billion, compared with an estimated $2.37 trillion global market capitalisation for all cryptoassets.[2] Around 99% of stablecoins are pegged to the US dollar, with Tether and USDC together accounting for almost 90% of the market.

The US currently has the largest stablecoin market globally, with USD-denominated stablecoins accounting for approximately $301.1 billion of total stablecoin market capitalisation. By contrast, EUR-denominated stablecoins remain very small, with a market capitalisation of approximately $466.4 million as of November 2025.

The UK stablecoins market is nascent, with one UK issued fiat-referenced stablecoin, Tokenised GBP (tGBP). TGBP’s total market cap is $1.53 million, as of 11 March 2026. We have welcomed four stablecoin issuers into a stablecoins cohort in our Regulatory Sandbox- a space designed to allow firms to test products in live environments- where they are able to trial stablecoin products in real world conditions with appropriate safeguards. 

2. How is the sterling denominated stablecoin market in the UK expected to develop in the coming years? 

a. Who uses stablecoins and for what purposes? 

At the moment, stablecoins are primarily used for trading within the crypto sector. However, stablecoins also have other use cases, which are likely to increase subject to the development of necessary regulation and separately, viable commercial models. These include payments; use as collateral; and wholesale settlement in tokenisation of traditional assets e.g. to be the digital ‘cash leg’ for buying and selling of tokenised bonds, shares and funds.

Some global companies are also beginning to use stablecoins in treasury functions, to settle invoices and to use stablecoins for payrolls; and stablecoins have been used in humanitarian aid distribution.

   b. Are there any existing rules impacting the growth of stablecoins in the UK? 

Stablecoins issued or used in the UK are currently largely unregulated. Regulation of cryptoassets activities (including activities relating to stablecoins) in the UK is limited to anti-money laundering and financial promotion, and consumer protection legislation, including the Consumer Rights Act 2015. However, Parliament legislated in February 2026 to bring new regulated activities into the FCA’s remit, including the issuance of a qualifying stablecoin from an establishment in the UK.

The Government has stated that its aim in regulating cryptoassets is to provide the certainty firms need to innovate and grow.[3] We have consulted in stages on FCA regulation, as per our Cryptoasset Roadmap.[4] This has given all interested parties opportunities to engage with our proposals through their responses and other engagement opportunities such as roundtables.

This statutory instrument sets out that the new regime will commence on 25 October 2027. In accordance with that timeline, we are due to publish our final rules for the whole regime in mid-2026. This gives stablecoin issuers preparation time before we open the gateway for applications for authorisation on 30 September 2026. This will close on 28 February 2027. To support firms’ preparations, we are running information sessions and pre-application meetings.

The Government has stated that its aim in regulating cryptoassets is to provide the certainty firms need to innovate and grow.[5] We have consulted in stages on FCA regulation, as per our Cryptoasset Roadmap. This has given all interested parties opportunities to engage with our proposals through their responses and other engagement opportunities such as roundtables.

Other factors that may be impacting the growth of stablecoins in the UK include:

• A lack of a specific insolvency regime tailored to the risks posed by stablecoins. Should a major stablecoin fail, it is likely they would be subject to insolvency proceedings in the issuing country, potentially disadvantaging overseas holders. This uncertainty may deter users.
• Some current uncertainty around settlement finality; and some regulation does not currently allow aspects of securities settlement, such as the Central Securities Depositories Regulation requirement for settlement of securities to be undertaken in a jurisdiction’s national currency. This may be contributing to stablecoins not being used significantly for wholesale settlement, currently.
• In relation to stablecoins being used for payment, these are currently not within the FCA perimeter. The Payment Services Regulations 2017 (PSRs) sets out the requirements with which firms must comply when making payments. As stablecoins are not included in the PSRs, any payments made using stablecoins would not be subject to the requirements or protections set out in this regime.
• The risk of financial crime may deter users from stablecoin transactions for legitimate purposes. For example, the Government’s National Risk Assessment of Money Laundering and Terrorist Financing 2025 states that stablecoins are now the most commonly used cryptoasset to launder money.
• Capital requirements, in particular the Basel 3.1 standards requiring banks to hold a significant amount of capital (1250%) against stablecoins held on their balance sheet, has also been raised as an issue by industry.

3. What opportunities and risks does the growth of stablecoins (both denominated in sterling and in USD) pose for the UK’s economy and its financial services sector, and for retail customers? What evidence is there to suggest that this growth could disrupt the conduct of monetary policy and traditional financial intermediaries? Are there any additional financial crime considerations? 

The benefits of a UK regulated stablecoin regime are potentially significant. Stablecoins can offer faster settlement, greater programmability and increased transparency compared with traditional payment rails. These features could support cheaper and more efficient payments, particularly for cross‑border transactions, and enable new forms of tokenised financial activity, including the settlement of securities on distributed ledger technology, use for collateral and faster treasury management. For wholesale markets, regulated stablecoins could reduce counterparty and settlement risk and improve liquidity.

A summary of benefits includes:

• Instant/atomic settlement - this makes them faster than traditional payment rails, and the potential to be cheaper, with reduced need for intermediaries and increased liquidity.
• Programmability – smart contracts can be developed to automate processes, including actions contingent on future events. This can also mitigate fraud risks.
• Transparency – there is the ability for everyone to see a public blockchain, increasing the visibility of the history of uses of the stablecoins.
• Functionality of tokens – the tokens can themselves be programmed to include various data, including verification of its authenticity.  Some features of tokens, such as some issuers’ ability to freeze tokens are an advantage.
• Connectivity with other jurisdictions and other functionality, such as being an on chain transfer of value in respect of tokenised products.
• Reduction of FX risk

At the same time, stablecoins present risks. In relation to issuance, these include risks to consumers from failed or delayed redemption, operational resilience and cyber risks, and risks arising from the composition, custody and liquidity of backing assets.

Stablecoins are also exposed to financial crime risks, including money laundering, sanctions evasion, scams and the circulation of fake tokens. There are market risks and the risk of de-pegging. There are also risks of a run on a stablecoin.

There are also consumer protection risks, which include risks around insolvency, where there is no tailored resolution or insolvency regime, as well as the FSCS not providing protection in a last resort.

There are further longer‑term considerations around bank disintermediation, impacts on credit provision, and currency substitution, particularly where non‑sterling stablecoins are widely used.

4. How will the growth of stablecoins impact the Bank of England, PRA and FCA’s statutory objectives: price stability, financial stability, market integrity, consumer protection, competition and international competitiveness and growth? 

We designed our issuance regime with our statutory objectives in mind, balancing consumer protection with competitiveness and innovation. Our proposals address key risks, including redemption delay/failure, poor management of backing assets, and issuer governance or operational weaknesses.

To support stablecoins as trusted money-like instruments, we will require high-quality liquid backing assets, statutory trust segregations, par redemption rights, and transparency through disclosures and independent audits.

Our proposals seek to reduce risks to market integrity and disorderly outcomes. Standards on backing assets, custody, disclosure and redemption promote orderly trading and fair outcomes, including for overseas stablecoins admitted to UK trading platforms.

The growth of stablecoins in the UK could be complementary to and add to competition in the UK. Although this depends how they are used, and the relevant commercial model.

Given the global nature of stablecoin markets, we have designed our proposals with international competitiveness and growth in mind, carefully considering against other regimes. We have also created a stablecoins cohort in our Regulatory Sandbox, enabling firms to test in safe environments, and for both ourselves and the firms to learn from the testing . A clear and credible UK framework will support innovation, attract investment and reinforce the UK’s position as a global financial centre.

We are considering industry feedback on our proposed rules to help deliver against our objectives, including delivering a regime that’s internationally competitive, and are looking at overseas regimes as we develop our own. For example, we are proposing more permissive rules on the percentage of backing assets to be held in high quality liquid assets other than deposits, compared to the EU’s regime.

5. What can the UK learn from the way other jurisdictions have approached the regulation of stablecoins, such as the US and the EU? 

We have been engaging with regulators around the world to inform the design of a regime which balances the FCA’s objectives with our intention to be internationally competitive and to drive good consumer outcomes.

Examples of engagement include:

• Leading the development of the IOSCO Crypto and Digital Asset Recommendations.
• Co-leading the implementation review of these standards, considering regulatory frameworks in around 80 jurisdictions and deep dives of several of these.
• Involvement in the FSB’s thematic review of global regulatory frameworks for crypto including stablecoins.
• Extensive bilateral engagements with other regulators on developing stablecoin regimes.

We look forward to continuing our engagement with US regulators, as they develop detailed regulatory rules under the GENIUS Act, and through the Transatlantic Taskforce for Markets of the Future.

The EU implemented regulations for stablecoins in 2024, through their Markets in Crypto-Assets Regulation. This introduced requirements for Electronic Money Tokens i.e. stablecoins referencing a fiat currency. We have learned from the EU’s regime. For example, as set out in our consultation papers, we agree all stablecoin tokenholders should have the universal right of redemption at par value, and that backing assets should be in high quality liquid assets and segregated from the firms’ own assets.

While we can learn from the approaches of other regimes, stablecoins have been designed to operate without borders. To fully achieve the benefits of the new technology, regulatory regimes must be able to operate together. Stablecoins need to be able to transfer seamlessly across borders, and to function in many different environments. This is a longer-term goal while each jurisdiction is establishing their own rules. However, we see there to be significant benefits from equivalence and/or deference, enabling stablecoins issued in one jurisdiction to be used without undue frictions in another.

11 March 2026