UK Regulators Tap Crowd Wisdom for Crypto Rulebook Overhaul

London’s financial watchdog throws open the gates for public input on sweeping stablecoin and custody reforms—because nothing says ’democratic finance’ like letting bankers and Redditors co-write regulations.

The FCA’s latest move signals a reluctant embrace of crypto’s inevitable creep into mainstream finance—just don’t call it an endorsement. Their playbook? Bureaucratic crowd-sourcing meets blockchain’s ’move fast and break things’ ethos.

One cynical take? This ’open consultation’ smells like regulatory theater—a stalling tactic while traditional finance scrambles to build their own walled-garden crypto products. The real question: Will these rules protect consumers or just cement legacy players’ dominance?

FCA Outlines Stablecoin Oversight Plan as UK Pushes Toward Full Crypto Regulation

The FCA described the proposals as “the latest milestone on the road to crypto regulation,” building on months of industry engagement and previous consultation rounds.

The proposed measures plan to strike a balance between fostering innovation and ensuring market integrity and consumer protection.

We’re seeking views on stablecoins and safeguarding crypto to help shape a SAFE and competitive crypto sector. Our aim is to ensure regulated stablecoins maintain their value and customers are provided with the information they need.https://t.co/L180XEtKzt#Crypto #Stablecoins pic.twitter.com/ndpv0SzVH3

David Geale, executive director of payments and digital finance at the FCA, said the agency plans to support innovation while ensuring market trust:

“At the FCA, we have long supported innovation that benefits consumers and markets. At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that facilitates innovation and is underpinned by market integrity and trust.”

The rules WOULD apply to firms issuing stablecoins and offering crypto custody services.

Stablecoins, which are designed to maintain a fixed value by referencing fiat currencies like the pound or dollar, are seen as having strong potential to improve efficiency in payments, especially for cross-border transactions.

However, the FCA stressed that such benefits can only be realized if stability and transparency are ensured.

Under the proposals, regulated stablecoin issuers would be required to clearly explain how their assets are backed and managed. Custody providers would also need to demonstrate that consumer assets are secure and can be accessed at any time.

The FCA emphasized that the measures are designed to reduce the risk and impact of firm failures in the sector.

The regulator is also considering expanding its innovation services to include a specific focus on stablecoins in a MOVE to support financial services firms experimenting with the technology.

The FCA is coordinating closely with the Bank of England on the stablecoin regime. The central bank will oversee stablecoins that reach a systemic scale.

Sarah Breeden, deputy governor for financial stability at the Bank of England, welcomed the FCA’s proposals and confirmed that a complementary consultation paper will be released later this year.

“For those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year, including responding to industry feedback around allowing some return on backing assets,” Breeden said.

“We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime, including how firms transition within the regime,” she added.

The public has until July 31, 2025, to submit comments, and the final rules are expected to be published in 2026.

Industry Warns UK Risks Falling Behind as Stablecoin Oversight Remains Unclear

As the Financial Conduct Authority (FCA) invites public feedback on new stablecoin and custody regulations, the Bank of England has added weight to the conversation.

In early April, the Financial Policy Committee (FPC) flagged rising systemic risks tied to the rapid expansion of stablecoins and unbacked crypto assets.

UK’s @bankofengland warns of stablecoin risks as more young investors shift toward crypto. Concerns include reserve liquidity, currency substitution, and systemic fragility.#Crypto #Stablecoinshttps://t.co/XbIIAcF9iQ

The committee emphasized the importance of robust, liquid reserves to support redemptions, warning that poorly managed stablecoins could disrupt financial markets, especially if offshore sterling-pegged tokens gain traction.

Meanwhile, industry leaders are growing restless. Executives from Coinbase, Ripple, and ClearBank cautioned that the UK’s tightening regulatory environment could drive innovation abroad.

Delays in licensing and lack of clarity, particularly on stablecoin frameworks, are stalling product launches and capital inflows.

Although the UK government has proposed new rules, implementation details remain vague, leaving the future of the country’s crypto competitiveness uncertain as others race ahead