The Financial Conduct Authority has proposed lower capital buffer requirements for stablecoin issuers, stepping back from alignment with the EU's stricter MiCA framework. The move follows the Bank of England's decision to drop a hard cap on how much stablecoin an individual can hold, a reversal that signals the UK's appetite to carve out lighter-touch rules.
The FCA's proposal cuts the minimum capital buffer requirement below what the EU mandates under its Markets in Crypto-Assets regulation. That gap matters. Tighter buffers in the UK mean stablecoin companies face lower compliance costs and can operate with leaner balance sheets. It also means they're less insulated against losses if their reserves dip.
Competition for fintech and stablecoin issuance is fierce between jurisdictions. London wanted stronger ground after the EU locked in its MiCA rulebook. Regulators in the UK are betting that lighter capital rules will appeal to issuers and keep the City relevant in crypto markets. The Bank of England's earlier pivot on retail holding limits reinforces that tilt toward permissiveness.
However, lighter rules create friction. If a UK-licensed stablecoin issuer wants to operate across EU borders, it faces a patchwork of requirements. Companies will need to hold higher buffers for EU business even if UK rules allow less, adding operational complexity and cost. That defeats some of the competitive edge the FCA is chasing.
The proposal also raises questions about deposit protection. Stablecoins aren't deposits, so retail holders aren't covered by traditional deposit insurance schemes in any jurisdiction. Lower capital buffers tighten that safety margin further. If an issuer hits trouble, users have fewer assets behind their tokens.
The FCA's next step is to finalize the rule after consulting the industry and other stakeholders. The timing and exact threshold figures remain to be set. Until then, stablecoin firms are watching to see whether the UK's lighter hand will indeed stick or whether other regulators will push back.