UK's FCA Seeks Views on Stablecoins, Crypto Custody to Prevent Firm Failures

The U.K.'s Financial Conduct Authority (FCA) is seeking additional views on its upcoming stablecoins regime, it said on Wednesday.

"In support of the opportunities stablecoins present to financial services and the broader economy, the FCA will explore adding a specific focus on stablecoins to its innovation services in the coming months," the FCA's statement said.

The FCA's proposed rules are meant to ensure stablecoins maintain their value and seek to reduce the likelihood of stablecoin and crypto custody companies failing.

Stablecoins have been something regulators have been watching carefully following the collapse of the algorithmic stablecoin terraUSD in 2022 that resulted in investors losing out on their life savings.

The FCA has been establishing its new crypto regime since 2023. In 2023 it published a discussion paper with proposals for a stablecoins regime. The regulator has since upped its efforts to regulate the sector by releasing a series of discussion papers for the industry and the U.K. government is working on establishing new legislation to ensure the country's regulators have all the powers they need to launch their new regimes for the digital asset sector.

The FCA will be working with the Bank of England to regulate stablecoins.

"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," Sarah Breeden, deputy governor for financial stability at the Bank of England said.