Briefing
The UK Financial Conduct Authority (FCA) has published two pivotal Consultation Papers, CP25/14 and CP25/15, to establish a comprehensive prudential and conduct regime for key crypto activities, fundamentally bringing stablecoin issuance and cryptoasset custody within the UK’s financial services regulatory perimeter. This action imposes a new systemic architecture on firms, most critically by mandating the segregation of client cryptoassets under trust law principles and introducing a permanent minimum capital requirement of £150,000 for custodians (and £350,000 for stablecoin issuers) to ensure operational resilience and loss absorption capacity.
Context
Prior to this consultation, cryptoasset custody in the UK was largely unregulated, operating outside the Financial Services and Markets Act 2000 (FSMA) framework, leading to significant legal ambiguity regarding the ownership and recovery of client assets in the event of firm insolvency. This lack of clear legal title and operational ring-fencing represented a critical systemic risk, leaving retail and institutional investors exposed to the full impact of corporate failure, a vulnerability the new proposals directly address by applying traditional finance standards.
Analysis
This move mandates a significant architectural overhaul for all in-scope crypto firms, shifting their operational model from a simple technology provider to a regulated financial custodian. The requirement for client asset segregation necessitates a complete rebuild of key management systems and wallet infrastructure to ensure proprietary and client assets are legally and technically distinct, impacting treasury and operational workflows. Furthermore, the introduction of a permanent minimum capital requirement (PMR) forces a strategic re-evaluation of business viability and capitalization, ensuring firms possess the financial resilience required to absorb losses. The new prudential standards, labeled CRYPTOPRU, create a specific regulatory class for digital asset firms, embedding a critical layer of consumer protection into the firm’s balance sheet.
Parameters
- Custodian Minimum Capital → £150,000 (The minimum Permanent Minimum Requirement (PMR) for crypto custodians).
- Stablecoin Issuer Capital → £350,000 (The minimum PMR for fiat-referenced stablecoin issuers).
- Client Asset Standard → Segregation of Client Assets (Mandatory separation of client cryptoassets from firm’s own assets under trust law).
- Consultation Deadline → July 31, 2025 (Final date for industry feedback on the proposed rules).
Outlook
The immediate next phase is the industry’s response to the consultation, with final rules and a new prudential sourcebook (CRYPTOPRU) expected in 2026, followed by a transition period. This UK-specific approach, which integrates crypto into the existing FSMA framework rather than creating a separate MiCA-style regime, sets a powerful precedent for non-EU jurisdictions seeking to regulate custody and stablecoins. The imposition of clear capital and custody standards is likely to accelerate institutional adoption by mitigating counterparty risk, while simultaneously forcing smaller, undercapitalized firms to exit or consolidate.
Verdict
The FCA’s new custody and capital proposals are a decisive regulatory inflection point, codifying operational resilience and client asset protection as non-negotiable foundations for the UK digital asset market’s long-term legitimacy.
