UK’s FCA Invites Feedback on Stablecoins and Crypto Custody to Avert Business Failures

The U.K.’s Financial Conduct Authority (FCA) is seeking additional feedback on its upcoming stablecoins regime, as announced on Wednesday. “In support of the opportunities stablecoins present to financial services and the broader economy, the FCA will explore a specific focus on stablecoins within its innovation services in the coming months,” the FCA’s statement noted.

The proposed rules aim to ensure stablecoins maintain their value and minimize the risk of failure among stablecoin and crypto custody companies. Regulators have been closely monitoring stablecoins since the collapse of the algorithmic stablecoin terraUSD in 2022, which resulted in significant losses for investors.

Since 2023, the FCA has been developing its new crypto framework, having published a discussion paper outlining proposals for a stablecoins regime. The regulator has intensified its efforts to oversee the sector, releasing a series of discussion documents and working with the U.K. government to establish new legislation that grants necessary powers for managing the digital asset sector.

The FCA plans to collaborate with the Bank of England in regulating stablecoins. “For those stablecoins that expect to operate at a systemic scale, the Bank of England will publish a complementary consultation paper later this year, incorporating responses to industry feedback regarding allowing some return on backing assets,” stated Sarah Breeden, deputy governor for financial stability at the Bank of England.