The UK now has a settled framework for stablecoins. Issuing a qualifying stablecoin in the UK becomes an FCA-authorised activity on 25 October 2027 under the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, the FCA's final issuance rules were published on 30 June 2026, and sterling stablecoins that become systemic are regulated by the Bank of England. The term digital settlement asset, introduced by FSMA 2023, remains the legal hook for Bank of England oversight of payment systems that use them. This guide explains how the pieces fit together for issuers, payment firms and intermediaries.
What Are Digital Settlement Assets?
The term 'digital settlement asset' (DSA) was introduced in the Financial Services and Markets Act 2023 (FSMA 2023). It refers to a digital representation of value or rights that can be used for the settlement of payment obligations, is transferable and storable electronically, and uses technology supporting the recording or storage of data (which includes but is not limited to distributed ledger technology). In practice, the primary focus of the initial regulatory framework is fiat-backed stablecoins: tokens whose value is pegged to a traditional currency (most commonly GBP or USD) and backed by reserves of fiat currency or highly liquid assets.
The definition is deliberately technology-neutral. It does not require blockchain or distributed ledger technology: any digital token meeting the functional criteria can fall within scope.
Legislative Framework
The UK framework now rests on four pieces:
| Instrument | What it does | Status at 19 October 2026 |
|---|---|---|
| FSMA 2023, sections 22 and 23 and Schedule 6 | Defines DSAs and amends the Banking Act 2009 so payment systems and service providers using DSAs can be brought under Bank of England oversight | In force |
| Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102) | Creates regulated activities including issuing qualifying stablecoins, safeguarding cryptoassets, operating trading platforms, dealing, arranging and staking | Published 4 February 2026; full commencement 25 October 2027 |
| FCA PS26/10 | Final rules for stablecoin issuance, redemption, backing assets and disclosure | Published 30 June 2026 |
| Bank of England policy statement and draft Code of Practice | Rules for sterling systemic stablecoins | Published 22 June 2026; Code to be finalised by end of 2026 |
Firms apply to the FCA for authorisation during the application window, which runs from 30 September 2026 to 28 February 2027. See our UK crypto licence page for the authorisation process.
Issuance Requirements
PS26/10 sets the final rules for UK-issued qualifying stablecoins. Backing. Every coin must be fully backed from the moment it is minted, including coins the issuer holds itself. The backing asset pool is held on a statutory trust for holders, in a single currency, and may include tokenised versions of permitted assets. Redemption: Holders can redeem at par, with the redemption period starting once the issuer has completed its customer checks. No yield: Issuers cannot pay interest or other yield from backing assets to holders. Disclosure: Issuers publish information on the coin, its backing and redemption.
Systemic Designation and Bank of England Oversight
Where a payment system using a stablecoin becomes systemically important, HM Treasury can recognise it for Bank of England oversight under the Banking Act 2009 as amended by FSMA 2023. Systemic designation brings the payment system and its key service providers within a more intensive supervisory regime, including requirements for financial resilience, operational resilience, recovery and resolution planning, and access to the Bank of England's settlement infrastructure.
On 22 June 2026 the Bank of England published its policy statement on sterling systemic stablecoins and a draft Code of Practice. Up to 70% of backing assets may be held in short-term UK government debt, with the rest in deposits at the Bank. An initial issuance guardrail of £40 billion applies to each systemic stablecoin, and the Bank dropped the individual holding limits it had consulted on. Non-systemic stablecoins, including those used mainly to trade cryptoassets, are supervised by the FCA alone.
Implications for Payment Firms
The DSA framework has important implications for payment institutions and EMIs that interact with stablecoins. Firms that facilitate payments using stablecoins, whether as acquirers, processors or wallet providers, may need to consider whether their activities bring them within the new regulatory perimeter. Firms already authorised as PIs or EMIs may find that some stablecoin-related activities fall within their existing permissions, while others require additional authorisation or notification. The interaction between the stablecoin regime, existing EMI authorisation and the cryptoasset AML registration regime under the MLRs needs analysis firm by firm.
Timeline and Next Steps
The final rules are published. The next dates are fixed: the FCA application window closes on 28 February 2027, the Bank of England intends to finalise its Code of Practice by the end of 2026, and the regime starts on 25 October 2027. A firm that applies inside the window and is still awaiting a decision on 25 October 2027 can continue its business until the FCA decides.
Regulatory Counsel advises firms on the UK cryptoasset regulatory framework, stablecoin issuance requirements and FCA authorisation. Contact us for a written proposal. See our cryptoasset registration page for more.
Frequently asked questions
A digital representation of value or rights that can be used for payment settlement, is electronically transferable and storable, and uses technology for recording data. In practice, the initial focus is on fiat-backed stablecoins.
Yes. From 25 October 2027 issuing a qualifying stablecoin in the UK is a regulated activity under SI 2026/102. The FCA application window runs from 30 September 2026 to 28 February 2027, and PS26/10 sets the issuance rules.
MiCA has applied across the EU since 2024 and treats fiat-backed stablecoins as e-money tokens issued by credit institutions or EMIs. The UK creates a separate FSMA activity for issuing qualifying stablecoins, with Bank of England rules for systemic sterling coins.
The FCA stablecoin regime starts on 25 October 2027. The FSMA 2023 DSA provisions are already in force, and the Bank of England expects to finalise its systemic stablecoin Code of Practice by the end of 2026.
An EMI needs separate FCA authorisation for the activity of issuing a qualifying stablecoin once the regime starts on 25 October 2027. Its EMI authorisation alone does not cover it.
No. Under PS26/10 an issuer cannot pay interest or other yield from backing assets to holders, and third parties cannot pass such interest on.
Definitive guides on this topic
The permanent reference pages this article relates to.