UK FCA cuts stablecoin capital to 1%, undercutting EU's MiCA rules

The UK's financial regulator halved its proposed stablecoin capital buffer to 1%, creating a regulatory gap with the European Union's stricter 2% requirement under MiCA.

The Financial Conduct Authority reduced the capital requirement for stablecoin issuers to 1% of the total value of tokens in circulation, down from the 2% proposed in earlier drafts, according to the final crypto rulebook published Tuesday.

"The feedback we got was that we're starting a bit high," David Geale, executive director for payments and digital finance at the FCA, told journalists. The final rules were based on evidence from industry, he added.

The change makes the prudential framework more proportionate for larger issuers while maintaining the robustness of the overall regime, the FCA said in its policy statement. The regulator also eased other proposals, giving firms more time to return funds to customers redeeming stablecoins and removing certain public disclosure obligations. For crypto exchanges, the FCA said it would tailor proposed trading rules to better reflect how crypto markets operate, requiring them to set aside 40% of trading capital to cover potential losses.

The lighter capital requirement positions the UK as a more attractive jurisdiction for stablecoin issuers relative to the EU, where MiCA mandates a 2% equivalent. The new regime takes effect in October 2027, with most stablecoins falling under FCA supervision while systemic tokens face a tougher regime led by the Bank of England.

The FCA's final rulebook follows the Bank of England's June 22 reversal of its proposed 20,000-pound ($26,500) limit on individual stablecoin holdings. The BOE instead set a $50 billion issuance cap for systemic stablecoins, signaling a broader regulatory pivot toward competitiveness.

The rules apply only to sterling-denominated stablecoins, which represent a small fraction of the global market dominated by dollar-pegged tokens such as Tether's USDT and Circle's USDC. Benoit Marzouk, CEO of BCP Technologies, which issues the tGBP stablecoin, said even the reduced 1% requirement remains challenging, noting that U.S. rules are likely to adopt a flat capital requirement.

UK finance minister Rachel Reeves said in December the FCA's rules would provide "clear rules of the road" and keep "dodgy actors" out of the market. Policymakers globally are under pressure to balance consumer protection with competitiveness, particularly as the Trump administration pursues crypto-friendly policies in the U.S.

The FCA's framework creates a three-tier regulatory structure: sterling stablecoin issuers under the FCA, systemic stablecoins under the BOE, and crypto exchanges under tailored FCA rules. The October 2027 implementation date gives firms roughly 15 months to prepare compliance systems.

This article is for informational purposes only and does not constitute investment advice.