With the publication of the FCA's cryptoasset regime policy statements (PS26/9 to PS26/13), followed days later by the UK-US Joint Statement on Stablecoins, the UK has taken a major step towards integrating digital assets into the regulated financial system. Coming into effect in October 2027, the regime positions cryptoassets and stablecoins as increasingly legitimate components of payments, settlement and capital markets infrastructure.
For banks, payment service providers, crypto-exchanges and other crypto-native businesses, the question is now whether they are ready to operate under a regime that increasingly resembles traditional financial services regulation.
The UK's answer to MiCA and GENIUS
The UK framework should be viewed alongside the European Union's Markets in Crypto-Assets Regulation (MiCA) and the US GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act. Rather than copying either model, the FCA has developed a framework that combines market integrity, consumer protection and prudential oversight with support for responsible innovation and competitiveness, and the objective of preserving and supporting the UK's competitiveness as a global financial centre.
The FCA's Crypto Regime at a Glance
The regime is built around five policy statements:
- PS26/9 introduces listing standards, disclosures, and market abuse controls similar to traditional securities markets.;
- PS26/10 establishes reserve, safeguarding, redemption, and disclosure requirements for UK-issued, GBP-backed, stablecoins;
- PS26/11 covers trading platforms, lending, borrowing, staking, safeguarding, and DeFi-related activities.
- PS26/12 introduces prudential expectations on capital, liquidity, governance, and risk management.
- PS26/13 applies broader FCA standards including Consumer Duty, operational resilience and the Senior Managers & Certification Regime (SM&CR).
The regime provides a clearer pathway for both crypto-native firms and traditional financial institutions to participate in digital asset markets. By establishing expectations around governance, custody, prudential standards and customer protection, it removes many of the uncertainties that have historically limited institutional participation and reinforces opportunities to grow the use cases for virtual asset-backed products, including stablecoin-enabled payments, tokenised deposits, treasury and liquidity solutions, tokenised securities, fund tokenisation and institutional custody services.
Stablecoins Move into the Strategic Mainstream
A particularly significant element of the regime is PS26/10, which establishes clear requirements for reserve backing, asset segregation, redemption rights and disclosures. In doing so, the FCA is effectively positioning stablecoins as regulated financial products rather than purely crypto assets.
This direction is reinforced by the UK-US Joint Statement on Stablecoins, which recognises the role that well-regulated stablecoins can play in payments, cross-border transactions and capital markets. The statement also signals a desire for greater transatlantic alignment.
Recent market developments already illustrate the direction of travel.
Recent market developments already illustrate the direction of travel. Revolut's decision to delist USDT for European customers reflects a broader trend among regulated firms to favour issuers that align with expectations around transparency, governance, reserves and supervisory engagement.
What About Decentralised Finance (DeFi)?
A strongly debated aspect of the FCA package is its approach to decentralised finance. One argument in the "crypto-community" is that regulators cannot impact DeFi protocols, which cannot be shut down and are therefore out of reach of the regulators.
In its approach, the FCA has not attempted to regulate autonomous code or prohibit DeFi protocols. Instead, PS26/11 adopts an activity-based approach focused on the people, entities and services surrounding those protocols. In practice, the regulator's attention is likely to fall on front-end operators, protocol foundations, governance, staking providers, and lending service operators rather than the software or the blockchain used by the protocols.
PS26/11 states that further guidance will be published covering indicators of centralisation and decentralisation, as well as guidance on mitigating operational resilience and financial crime risks when firms integrate with or interact with DeFi arrangements. This suggests the FCA sees DeFi not as a settled regulatory question but as an evolving area where governance, accountability and risk management will increasingly matter as much as technology.
This should not be viewed as a competitive disadvantage for traditional financial institutions or centralised crypto firms. If anything, it helps address a longstanding concern that economically similar activities were being conducted under very different governance and compliance standards.
We see now a trend where the firms that chose to stay outside of the regulatory environment may in the future represent a growing AML / Financial Crime risk factor and see their market capitalisation and market share reduce.
We see now a trend where the firms that chose to stay outside of the regulatory environment may in the future represent a growing AML / Financial Crime risk factor and see their market capitalisation and market share reduce. Recent market developments already illustrate this: Revolut's decision to delist Tether’s USDT stablecoin for European customers under MiCA reflects a broader trend among regulated firms to favour stablecoin issuers that align with emerging expectations around transparency, governance, reserves, and supervisory engagement. The significance of such decisions extends beyond Europe: For FIs, how will risk appetite align in the crypto space with "traditional" products and activities? For crypto-based platforms and protocols, will access to regulated distribution channels become more valuable than market capitalisation alone?
The FATF Factor
Alongside UK, EU and US developments, the Financial Action Task Force (FATF) continues to set the global baseline for virtual asset regulation. Its latest update highlighted concerns around stablecoin misuse, offshore virtual asset service providers (VASPs), unhosted wallets and DeFi-related risks. operating outside effective supervision, peer-to-peer transactions involving unhosted wallets and continuing challenges related to DeFi arrangements. It also reiterated that where persons or entities exercise control or significant influence over a DeFi arrangement, regulatory obligations may still apply, which the FCA fully aligns with.
Alongside UK, EU and US developments, the Financial Action Task Force (FATF) continues to set the global baseline for virtual asset regulation.
For crypto firms outside the main regulatory environment, a distinction may increasingly emerge between regulated and unregulated digital finance. And a de facto exclusion from regulated markets could emerge if supervisors increasingly require enhanced due diligence or impose restrictions on interactions with opaque, non-cooperative or insufficiently regulated crypto ecosystems.
A defining shift for digital finance
The UK's crypto regime represents the foundation of a new market structure for digital assets. It raises governance expectations but also creates a clearer pathway for financial institutions and crypto firms to participate in regulated digital finance.
For DeFi ecosystems, the regime signals that economic substance, rather than decentralised branding, will increasingly determine regulatory scrutiny. It also asks the longer question of whether the perceived competitive advantage that decentralisation provides may become an obstacle, should the protocols using it choose not to participate in emerging regulatory standards.
More broadly, the FCA's framework suggests that the debate has shifted from whether crypto belongs in the financial system to who will be trusted to participate in it.
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