The UK Financial Conduct Authority (FCA) has halved its proposed capital requirement for stablecoin issuers, reducing the rule from 2% to 1% of issued tokens. The change, announced on June 30, reflects a shift toward a more competitive regulatory framework designed to keep the stablecoin industry anchored in Britain rather than driving it to other jurisdictions.

Why Did the FCA Lower the Capital Requirement?

The FCA's decision came after extensive consultations with industry participants who argued that the original 2% threshold was too strict. The regulator acknowledged this feedback and adjusted its approach to create what it called a more "proportionate" regime.

"The feedback we got [was] that we're starting a bit high. [The final rules were based on] evidence [...] from industry," said David Geale, the FCA's executive director for payments and digital finance.

David Geale, Executive Director for Payments and Digital Finance, Financial Conduct Authority

This adjustment reflects a broader regulatory philosophy: Britain wants to establish clear rules for stablecoins without making the rules so onerous that companies relocate to friendlier jurisdictions. The move signals that UK policymakers understand the competitive dynamics of the global crypto market and are willing to calibrate their approach accordingly.

What Does This Mean for Stablecoin Issuers?

The capital requirement applies specifically to sterling-denominated stablecoins, not the major dollar-backed coins like USDT (Tether) and USDC (USD Coin). To illustrate the practical impact, consider Tokenised GBP, the largest pound-backed stablecoin issued by BCP Technologies. With a market value of approximately £23.6 million, the original 2% rule would have required roughly £472,000 in capital reserves, while the new 1% rule cuts that requirement to about £236,000.

Even with the reduction, some issuers still view the requirement as challenging. Benoit Marzouk, chief executive and co-founder of BCP Technologies, acknowledged that the 1% threshold remains demanding for smaller operators.

How to Understand the UK's Broader Stablecoin Regulatory Framework

• FCA Oversight: Most stablecoin issuers will be regulated by the FCA under the new proportionate regime, with the 1% capital requirement applying to sterling-backed tokens.
• Bank of England Supervision: Stablecoins that become systemic or significant enough for payments will face stricter regulation from the Bank of England, creating a tiered approach based on market impact.
• Implementation Timeline: The full UK crypto regulatory regime is expected to come into force in October 2027, giving issuers time to prepare for compliance.
• Additional Softening: Beyond the capital reduction, the FCA has relaxed other components of its proposal, including allowing firms more time in certain redemption cases and dropping certain public disclosure requirements.

Is There Broader Debate About Stablecoin Regulation?

While the UK has taken a measured approach, not everyone agrees on how stablecoins should be treated. The Bank for International Settlements (BIS), a global financial institution, recently argued that stablecoins fall short as money. However, this assessment has drawn criticism from major crypto players.

Coinbase, one of the world's largest cryptocurrency exchanges, pushed back against the BIS characterization, arguing that the organization was applying an unfair standard. Faryar Shirzad, Coinbase's chief policy officer, contended that BIS was comparing stablecoins to an "idealized monetary system while holding the incumbent system to its real-world performance".

Faryar Shirzad, Coinbase's chief policy officer

"Stablecoins deserve the same plumbing that produces par, rather than being faulted for the absence of access they have never been granted," stated Faryar Shirzad, chief policy officer at Coinbase.

Faryar Shirzad, Chief Policy Officer, Coinbase

Shirzad pointed to real-world examples of stablecoins moving beyond crypto trading, including settlement partnerships with Visa and Mastercard, as well as Stripe's acquisition of Bridge, a stablecoin infrastructure company. He also noted that traditional banking already fails the "singleness of money" standard that BIS applied to stablecoins, citing ATM fees, interchange costs, and correspondent banking charges as examples.

Regarding regulatory concerns, Shirzad dismissed allegations that stablecoins are inadequately regulated, pointing out that they are now covered by multiple regulatory frameworks, including reserve capital requirements. He suggested that the policy debate has shifted from whether stablecoins can function as money to how they should be regulated, and he argued that "the U.S. and UK have the better read on it".

The UK's decision to cut capital requirements by half demonstrates a pragmatic approach to stablecoin regulation. By balancing consumer protection with competitive viability, Britain is attempting to establish itself as a hub for responsible stablecoin innovation. Whether other jurisdictions follow suit remains to be seen, but the FCA's move suggests that regulators are listening to industry feedback and adjusting their frameworks accordingly.