In 2024, the FCA published its roadmap for the consultations it would be undertaken in relation to the regulatory regime for cryptoassets.  Having previously published a Discussion Paper at the start of May 2025 on how it proposes to regulate certain cryptoasset activities, the FCA has now published further two consultations:  CP25/14 on stablecoin issuance and cryptoasset custody (see summary here) and CP25/15 on the prudential regime for cryptoasset firms.

CP25/15 (the “CP”) specifically covers the prudential rules for firms who will be doing the new regulated activities of (i) issuing qualifying stablecoins or (ii) safeguarding qualifying cryptoassets.  However, the FCA says that the CP may be relevant to firms seeking authorisation for other regulated cryptoasset activities, as some of the topics covered apply common standards across firms and sectors.

The main features of the new prudential regime will be as follows:

• Regulatory capital requirements
       
  

  Cryptoasset firms will be subject to an overall financial adequacy rule (OFAR) that requires them to, at all times, maintain financial resources that are adequate in both amount and quality for the business they undertake.  

  Like investment firms, cryptoasset firms will be subject to an “own funds requirement” (OFR), the minimum amount of which will be the higher of three components:

  • a permanent minimum requirement (which it is proposed will be £350,000 for a stablecoin issuer and £150,000 for a firm that is safeguarding qualifying cryptoassets);
  • a fixed overheads requirement, equal to one quarter of the firm’s relevant expenditure in the previous year; and
  • a K-factor requirement (like that used for investment firms), which is a variable amount based on the firm’s activities and the risks associated with those activities.
      

  The cryptoasset firm will then have to hold sufficient capital to meet the OFR.  There will be detailed rules regarding what is eligible to count as capital for these purposes.  Fully paid up shares will be the preferred type of capital, but other capital instruments will be allowed, subject to eligibility criteria and within predetermined limits.  This follows the approach that currently applies to investment firms.  The FCA says that a cryptoasset firm will not be allowed to include cryptoassets that have been issued by the cryptoasset firm itself or by a connected party.
      

• Liquid assets requirement
      
  

  Cryptoasset firms will also be subject to minimum liquidity requirements. 

  All cryptoasset firms will be subject to a “basic liquid assets requirement” (BLAR) that is calculated as being an amount equal to one-third of the firm’s fixed overheads requirement.  The intention is to ensure that cryptoasset firms will always have a minimum stock of liquid assets to fund the initial stages of a wind-down process.

  For stablecoin issuers, there will be an additional “issuer liquid asset requirement” (ILAR) to ensure that issuers can top up the “backing pool” of stablecoin assets using their own resources within a short timeframe (T+1) where they identify a shortfall.

  The BLAR and ILAR will be the minimum liquidity that the FCA would expect cryptoasset firms to hold at all times.  The FCA says it plans to consult separately on an “internal capital adequacy and risk assessment” (ICARA) process (like that currently used by investment firms), and that through that process a cryptoasset firm may determine that it needs to have additional liquidity beyond the minimum requirements.

  In terms of what assets can be used to satisfy the BLAR, the CP says that a cryptoasset firm can use any of the following: coins and banknotes, short-term deposits at a UK bank, UK gilts and Treasury bonds and units in UK regulated money market funds or comparable third country funds.  Cryptoassets will not count towards the liquidity requirements.
     

• Concentration risk

      
  The FCA is concerned about the concentration risk that arises if a firm is overly exposed to one or more counterparties or type of asset.  The FCA has previously given the example of Circle and the impact on the secondary market price of its USDC stablecoin after the collapse of Silicon Valley Bank.

  To guard against concentration risk, cryptoasset firms will be required to have sound administrative and accounting procedures supported by robust internal controls.  The FCA has given an indication of what it expects firms’ considerations to include, and we expect that the FCA will be considering the adequacy of these arrangements when firms come to make their applications to the FCA for permission to do the new regulated cryptoasset activities. 

  Issuers of stablecoins will also be expected to consider the concentration risk in the backing asset pool.
     

• Introduction of an integrated prudential rulebook
      
  The FCA says that its long-term vision is to establish an integrated prudential sourcebook (known as COREPRU) that will apply common approaches across all the firms that the FCA prudentially regulates, in all sectors.  The FCA will then publish separate rulebooks which will supplement the base COREPRU requirements with requirements for specific firms based on the specific needs relating to their sector.
       
  The new prudential regime for cryptoasset firms will be the first (and, for the time being, only) prudential regime to follow this approach.  The draft rules set out in the CP include a draft COREPRU rulebook and a separate rulebook specifically for cryptoasset firms known as CRYPTOPRU.  The CP therefore gives an insight into the FCA’s broader ongoing work in relation to prudential regulation.

The FCA says that some aspects of the prudential regime for cryptoasset firms are being held back for a subsequent consultation which is likely to take place in Q4 2025 or Q1 2026.  Topics for the subsequent consultation will include: the requirements for cryptoasset firms that are doing activities other than issuing stablecoins and safeguarding; the requirements for cryptoasset firm groups, and how cryptoasset firms will assess the adequacy of their capital using an ICARA-style process.

The consultation closes on 31 July 2025.

Authored by Dominic Hill and Christina Wu.

This article is for guidance only and is a non-exhaustive summary only of certain aspects of the points discussed and should not be relied on as legal advice in relation to a particular transaction or situation