UK Stablecoin Regulation in 2026: What Issuers and Payment Firms Must Prepare For

UK stablecoin regulation is now settled. From 25 October 2027, issuing a qualifying stablecoin in the UK is a regulated activity that needs FCA authorisation. A qualifying stablecoin is a cryptoasset that aims to keep a stable value against a fiat currency, such as sterling or dollars, backed by assets. The FCA published its final issuance rules in PS26/10 in June 2026, and its application window is open from 30 September 2026 to 28 February 2027. This article sets out what issuers need, how backing and redemption work, and what payment firms should do now.

The UK Approach to Stablecoin Regulation

The UK has brought stablecoins into the same FSMA regime as other cryptoassets. SI 2026/102 creates seven new regulated activities, and issuing qualifying stablecoin in the UK is one of them. Non-systemic issuers are regulated by the FCA alone. Issuers that HM Treasury recognises as systemic, because their coins are widely used for payments, are also supervised by the Bank of England. The FCA has run a stablecoin cohort in its Regulatory Sandbox, selecting four firms in February 2026, and its 2026 payments priorities include work on how stablecoins can be used in regulated payments.

The regulatory rationale is clear: as stablecoins gain adoption as payment instruments, they must be subject to the same consumer protections and prudential standards as existing electronic money and payment services. A customer using a GBP-backed stablecoin to pay a merchant should have the same rights and protections as a customer using an e-money wallet.

Authorisation Requirements for Stablecoin Issuers

Firms issuing qualifying stablecoins in the UK need FCA authorisation under Part 4A of FSMA for the new activity of issuing qualifying stablecoin. This is a separate permission, not an e-money or payment institution licence. Issuers must meet the threshold conditions and hold own funds of at least the highest of the £350,000 permanent minimum requirement, the fixed overheads requirement and a K-factor requirement of 1% of the average value of coins in issue (PS26/12). The Consumer Duty, the Senior Managers and Certification Regime and the FCA's conduct rules apply. Firms already authorised under FSMA apply for a variation of permission instead. Our guide to UK cryptoasset authorisation covers the full application.

Reserve Backing Requirements

PS26/10 sets the final backing rules for non-systemic issuers:

• Full backing. Every coin minted, including coins the issuer holds, must be fully backed.
• Statutory trust. The backing assets are held on a statutory trust for coin holders, with a separate trust for each stablecoin product.
• Core assets. Backing is mainly short-term deposits and short-term government debt. At least 5% must be held in deposits available on demand.
• Expanded assets. Longer-dated government debt, certain money market funds and repurchase agreements are allowed if the issuer notifies the FCA and keeps enough core assets to meet its highest daily redemptions.
• Same currency. Backing assets must be in the coin's reference currency.
• Custody. No more than 20% of the backing pool may be held by a custodian in the issuer's own group, subject to an exemption process, and each custodian must sign an acknowledgement letter.
• Redemption. Holders can redeem at par. The issuer must pay out by the end of the next business day after it receives the coin, with identity checks done first.

For systemic stablecoins, the Bank of England's policy statement of 22 June 2026 requires at least 30% of backing in unremunerated deposits at the Bank and up to 70% in UK government debt with up to six months to maturity, with redemption within 24 hours. The Bank dropped its proposed limits on individual holdings and set a temporary cap of £40 billion of issuance per systemic coin. It intends to finalise its code of practice by the end of 2026.

Comparison with EU MiCA

The EU's Markets in Crypto-Assets Regulation (MiCA) creates two distinct categories for stablecoins: asset-referenced tokens (ARTs) and e-money tokens (EMTs). ARTs reference a basket of assets and require specific authorisation; EMTs reference a single fiat currency and must be issued by credit institutions or EMIs. The UK has taken a different route: a single FSMA permission for issuing qualifying stablecoins, with backing held on statutory trust, rather than treating stablecoins as e-money. Firms serving EU customers should read our guide to EU MiCA CASP authorisation.

Firms operating across both the UK and EU will need to understand both frameworks and ensure compliance in each jurisdiction. Dual-jurisdiction stablecoin issuance will require careful regulatory planning.

Implications for Payment Firms

Payment firms that do not issue stablecoins may still need permission. Holding customers' stablecoins is safeguarding qualifying cryptoassets, and buying, selling or exchanging them for customers can be dealing or arranging. Each is a separate regulated activity from 25 October 2027. A payment institution or EMI licence under the PSRs or EMRs does not cover these activities.

The FCA's 2026 payments priorities say it will work with the sector on how stablecoins and tokenised payment instruments can be used in regulated payments, so further changes to payments rules are possible. Payment institutions and EMIs planning stablecoin services should map each step of the customer journey to the new activities now, so that any application can be filed inside the window. See our guides to the UK electronic money institution licence and UK cryptoasset AML registration.

What Firms Should Do Now

1. Confirm which of the new activities your model involves: issuing, safeguarding, dealing, arranging or operating a platform.
2. File your FCA application inside the window, which closes on 28 February 2027, so the saving provision protects your business if a decision is still pending on 25 October 2027.
3. Plan capital to the £350,000 permanent minimum and the 1% K-factor for coins in issue.
4. Set up the statutory trust, custody and acknowledgement letters, and a backing asset policy that meets PS26/10.
5. Build redemption operations that pay out by the end of the next business day, with identity checks completed first.

Regulatory Counsel advises cryptoasset firms and payment institutions on stablecoin regulatory strategy, FCA authorisation and compliance framework development. Contact us for a written proposal.