FCA’s New Approach to Crypto Regulation
The UK Financial Conduct Authority (FCA) has released detailed proposals to introduce capital and liquidity requirements for crypto firms. These new rules aim to protect users and bring digital asset service providers in line with traditional financial institutions.
The proposals are part of the FCA’s broader goal to regulate cryptoasset activities responsibly while supporting innovation. As the UK positions itself as a global crypto hub, this step shows a clear intention: crypto businesses must operate with the same stability and financial discipline expected in mainstream finance.
This article explains what these new capital rules mean for crypto firms, who will be affected, and how it could shape the future of the crypto ecosystem in the UK.
What Are the Proposed Capital Rules?
In June 2025, the FCA released Consultation Paper CP25/15, outlining a new prudential regime for crypto firms. This covers how much capital (money or assets) crypto businesses need to hold to cover risks and ensure they don’t collapse during market stress.
The key idea is that crypto firms – especially custodians, stablecoin issuers, and trading platforms – should maintain sufficient capital and liquidity to protect users, much like banks or investment firms.
The Three Capital Measures
Crypto firms will be required to meet the highest of three capital tests:
- Permanent Minimum Capital Requirement
- Custody firms: Minimum of £150,000
- Stablecoin issuers: Minimum of £350,000
- Fixed Overheads Requirement
- Firms must hold capital equal to one-quarter of their annual fixed costs.
- Risk-Based (K-Factor) Requirement
- This depends on how risky the firm’s business is. For example, stablecoin issuers must hold 2% of their average issuance volume in capital.
This structure mimics MiFID-style rules, which already apply in traditional finance, and makes it easier for crypto firms to integrate with the wider financial system.
Liquidity Requirements: What Firms Must Keep on Hand
Capital is one thing—but liquidity (how easily firms can access cash when needed) is just as important.
The FCA is introducing two new liquidity measures:
1. Basic Liquid Asset Requirement (BLAR)
All crypto firms will need to hold liquid assets (like cash, gilts, or money market funds) equal to at least:
- One-third of their fixed costs, and
- Any guarantees or off-balance sheet exposures
2. Issuer Liquid Asset Requirement (ILAR)
Stablecoin issuers must keep an extra liquidity buffer to ensure they can meet sudden redemption requests, especially if their backing assets lose value.
This aims to prevent the kind of collapse we saw with TerraUSD in 2022, where users lost billions due to a failed stablecoin.
Custody and Safeguarding Rules
In parallel with the capital proposals, the FCA also published Consultation Paper CP25/14 focused on custody and safeguarding of client cryptoassets.
Key proposals include:
- Client assets must be held in trust, fully segregated from the firm’s own assets.
- Daily reconciliation of client holdings is mandatory.
- Immediate notification is required if reconciliation errors are found.
- Stablecoins must be fully backed by high-quality liquid assets (HQLA), held with a regulated custodian.
These rules bring clarity and structure to how firms should hold and protect user funds—similar to how brokers and fund managers operate under the FCA’s Client Assets Sourcebook (CASS).
Why Is the UK Doing This?
The UK government and FCA are clear: they want to make the UK a global crypto leader, but that leadership must come with strong consumer protections.
Here are the main reasons behind the new rules:
- User protection: To ensure that users don’t lose their funds due to a firm’s poor financial health.
- Market stability: To prevent large-scale collapses that could shake investor confidence.
- Regulatory clarity: To reduce ambiguity for crypto firms and investors alike.
- Level playing field: To ensure crypto firms compete fairly with traditional financial services providers.
This aligns with the Cryptoasset Regulatory Framework introduced in 2023, which gradually brought stablecoins and crypto exchanges under FCA supervision.
Who Will Be Affected?
The new capital and liquidity rules will apply to all UK-registered firms carrying out the following activities:
- Issuing stablecoins used for payments
- Providing crypto custody services
- Operating crypto trading venues
- Offering crypto exchange or brokerage services
Foreign firms that want to operate in the UK market will also have to comply if they apply for FCA registration or seek to passport their services in.
These proposals are not optional. Once finalized, firms must meet the requirements to get or keep their FCA licenses.
What Should Crypto Firms Do Now?
The FCA is accepting feedback on the proposals until 31 July 2025. Final rules are expected to be published in early 2026.
In the meantime, crypto firms should:
- Assess their capital position: Calculate which capital rule applies and how much needs to be held.
- Review liquidity buffers: Ensure access to cash and safe assets meets BLAR or ILAR thresholds.
- Audit custody processes: Make sure user assets are segregated, reconciled daily, and properly safeguarded.
- Prepare for compliance: Build internal risk models, reporting systems, and documentation to meet FCA expectations.
These steps are critical to avoiding license delays or rejections when the rules go live.
What This Means for the Future of Crypto in the UK
The UK is moving toward a mature and structured regulatory framework for cryptoassets. This is part of a bigger global trend where jurisdictions like the EU (MiCA) and UAE (VARA) are also creating strict requirements for crypto businesses.
While some smaller crypto firms may struggle to meet the new costs, the overall direction is positive. It signals that:
- Crypto is here to stay,
- Investor trust is essential, and
- Regulated players will lead the next wave of growth.
For law firms like Cryptoverse Lawyers, this marks an important phase. Advising clients on crypto compliance, licensing, custody structuring, and regulatory risk management is more relevant than ever.
Final Thoughts
The UK’s proposed capital and liquidity rules for crypto firms are a landmark moment for the industry. They show that crypto is no longer a free-for-all—it’s becoming a serious, regulated sector.
Firms that adapt early will benefit from greater trust, better investor access, and long-term growth opportunities.
At Cryptoverse Legal Consultancy , we help crypto startups, exchanges, and VASPs align with evolving legal and regulatory requirements in the UK and globally. From FCA licensing to structuring compliant crypto services, our legal team is here to guide you.
1. What are the UK FCA’s new capital rules for crypto firms?
The FCA has proposed minimum capital requirements for crypto firms, including custodians (£150,000), stablecoin issuers (£350,000), and risk-based requirements tied to business activity. Firms must also hold capital equal to one-quarter of annual fixed costs.
2. Which crypto firms will be affected by these rules?
The rules will apply to UK-registered stablecoin issuers, custodians, trading platforms, and exchange/brokerage service providers. Foreign firms entering the UK market must also comply to obtain FCA approval.
3. What liquidity requirements will crypto firms face?
All firms must maintain liquid assets equal to one-third of fixed costs and cover off-balance sheet exposures (BLAR). Stablecoin issuers must also meet the Issuer Liquid Asset Requirement (ILAR) to handle redemption pressures.