UK Financial Regulator to Reduce Stablecoin Capital Requirements

The FCA's decision follows a shift in the Bank of England's stance on stablecoin ownership limits.

The UK's Financial Conduct Authority (FCA) has announced a reduction in capital requirements for stablecoin issuers, part of a broader regulatory framework for cryptocurrencies. The new requirement mandates that issuers maintain backing of only 1% of the total value of their stablecoins in circulation, down from the previously proposed 2%.

The FCA stated this adjustment aims to create a more proportionate prudential framework for larger issuers while maintaining overall system integrity. This change is notably less stringent than the European Union's Markets in Crypto Assets (MiCA) regulation, which retains the 2% requirement.

This move aligns with the recent reassessment by the Bank of England regarding ownership limits on stablecoins, including the withdrawal of a proposed cap of £20,000 ($26,500) per individual. The FCA emphasized that these adjustments are intended to make the regulatory framework more practical and manageable.

In addition to stablecoins, the FCA is also working to ease regulations for cryptocurrency exchanges. Under the new rules, exchanges must allocate 40% of their trading capital to cover potential losses and apply a similar loss estimate to collateral used in lending or trading activities.