UK dilutes stablecoin capital requirement in final crypto rulebook

By Phoebe Seers

LONDON, June 30 (Reuters) - Britain's financial regulator said on Tuesday it would reduce its planned capital requirements for stablecoin issuers after industry pushback, as it unveiled regulations to bring the cryptoasset sector fully within its remit for the first time. 

Policymakers around the world are under pressure to strike a balance between protecting consumers and remaining competitive, particularly in the face of crypto-friendly policies drawn up by U.S. President Donald Trump's administration.

British finance minister Rachel Reeves said in December the Financial Conduct Authority's rules would provide “clear rules of the road” and keep “dodgy actors” out of the market.

After a series of consultations with industry, the FCA said it would reduce a key capital requirement requiring firms to hold funds equal to 1% of the total value of stablecoins they issue, down from 2% previously proposed.

The FCA said the changes were aimed at creating a “proportionate” regime that would enable firms to compete internationally.

Officials said the UK regulator had initially set the bar too high on stablecoins.

“The feedback we got (was) that we’re starting a bit high,” David Geale, executive director for payments and digital finance, told journalists. The final rules were based on “evidence ... from industry,” he added.

Stablecoins are crypto tokens designed to hold a steady value and are predominantly used in crypto trading as well as, increasingly, in payments.

FCA EASES OTHER REQUIREMENTS

The regulator has also eased other earlier proposals, including by giving firms more time to return funds to customers redeeming stablecoins in certain instances and removing some public disclosure obligations. 

For exchanges, the FCA said it would tailor proposed crypto trading rules to better reflect how crypto markets operate.

The new regulatory regime will come into force in October 2027.

Most stablecoins will fall under FCA supervision, while those considered systemic — with the potential to be widely used for payments - will be regulated under a tougher regime by the Bank of England.

The FCA's rules on issuers only govern sterling-denominated stablecoins, which account for a small fraction of the global market.

Benoit Marzouk, CEO and co-founder of BCP Technologies, which issues the tGBP stablecoin, said even the lower 1% requirement remained challenging, noting that U.S. rules were likely to adopt a flat capital requirement.

(Reporting by Phoebe Seers; Editing by Tommy Reggiori Wilkes)