What HM Treasury’s 21 April 2026 draft Statutory Instrument actually does — and what UK stablecoin issuers, custodians and payment firms must prepare for under the FCA and Bank of England regime.
Key takeaways
- HM Treasury’s 21 April 2026 draft Statutory Instrument is a transitional, technical carve-out for UK-issued qualifying stablecoins (UKQS) — not a strategic loosening of the UK regime.
- Issuing a qualifying stablecoin remains a fully regulated activity. Safeguarding under regulation 9N still requires FCA authorisation. Lending and borrowing remain inside the dealing perimeter.
- The Bank of England’s systemic stablecoin proposals require 40% of backing assets in unremunerated accounts at the Bank, with the remaining 60% in short-term UK government debt, plus retail and business holding limits.
- The Money Laundering Regulations 2017 (as amended in September 2025) impose explicit customer due diligence, transaction monitoring and suspicious activity reporting obligations on UK crypto firms.
- FCA authorisation applications open in September 2026; full commencement of the parent regime is 25 October 2027. Readiness work needs to start now.
The op-ed framing — and why it misleads
A wave of opinion pieces is currently arguing that the UK should adopt a Wyoming-style “public-good” stable token model — pointing to the Frontier Stable Token (FRNT), the special relationship between Britain and America, and HM Treasury’s April 2026 announcement as evidence that Westminster is “embracing” stablecoins.
The framing is appealing. The reality is more demanding. The UK is not loosening its grip on stablecoin issuance, custody or payment use; it is building one of the more prescriptive prudential and conduct regimes in the G7. Firms that read the op-eds and miss the regulation will be unpleasantly surprised when they meet their FCA case officer.
This article sets out what the UK regime actually requires, where the genuine opportunities sit, and what compliance work needs to start now.
What did HM Treasury actually publish on 21 April 2026?
HM Treasury laid a draft Statutory Instrument and accompanying policy note on 21 April 2026, amending the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102). The parent instrument was made in February 2026 and is scheduled to commence in full on 25 October 2027. The pre-legislative consultation on the draft amendment closes on 22 May 2026.
The amendment makes four narrow but important changes:
- UKQS removed from the “dealing” and “arranging” perimeter (regulations 9I, 9J and 9K of SI 2026/102), on a transitional basis, to avoid double-regulation while HM Treasury consults on a unified payments perimeter in Q2 2026.
- UKQS lending and borrowing remains within the dealing perimeter — the FCA continues to address the associated consumer credit and credit-substitute risks.
- The temporary settlement exclusion under safeguarding (regulation 9N) is restricted so that it does not apply to firms holding UKQS in the course of providing payment services. Those firms still require safeguarding authorisation.
- Backing assets are carved out of the collective investment scheme and alternative investment fund classifications — a technical fix activated early to remove a structural barrier to use cases.
What the draft SI does not do: it does not exempt the issuance of a qualifying stablecoin from FCA authorisation, it does not remove safeguarding obligations, and it does not remove issuers from the financial promotions regime where lending or borrowing is involved. The regulated activity of issuing a qualifying stablecoin sits squarely inside the FCA-authorised perimeter.
What does the Bank of England regime require?
Stablecoin regulation in the UK is split between two regulators. Non-systemic issuers and intermediaries are supervised by the FCA. Once HM Treasury recognises a stablecoin payment system as systemic — based on the size, interconnectedness and substitutability of the system — the issuer transitions into a joint FCA/Bank of England regime, with the Bank overseeing prudential and financial-stability risks.
The Bank of England’s November 2025 Consultation Paper, on which responses closed on 10 February 2026, proposed the following architecture for systemic sterling-denominated stablecoins:
- Backing-asset composition. Up to 60% in short-duration UK government debt; the remaining 40% in unremunerated accounts at the Bank of England. Issuers transitioning from the FCA regime, or systemic at launch, may hold up to 95% in short-term UK government debt initially, scaling down over time.
- Statutory trust. Backing assets must be held on statutory trust for the benefit of coinholders, with qualified third-party safeguarding — a model drawn from the FCA’s Client Assets Sourcebook (CASS).
- Holding limits. Temporary limits of £20,000 per coin for individuals and £10 million for businesses, with an exemptions process for the largest businesses (and, under further proposals consulted on in November 2025, for retailers and cryptocurrency exchanges).
- Central bank liquidity arrangements under consideration to support systemic issuers in stress.
- Codes of Practice to be consulted on and finalised later in 2026, alongside a joint FCA/Bank approach document.
For any firm modelling a UK stablecoin business case on yield extraction from reserves, those Bank-held unremunerated balances are decisive. The Bank’s regime is designed precisely to constrain the private seigniorage model the op-eds are advocating.
What does the AML and financial crime regime require?
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs 2017”) were amended in September 2025 to impose explicit obligations on UK crypto firms, including UKQS issuers, custodians and intermediaries. The substantive obligations include:
- Customer due diligence on all users — including pooled client account monitoring.
- Transaction monitoring and suspicious activity reporting to the National Crime Agency.
- Trust registration with HMRC where cryptoassets are held in trusts.
- Sanctions screening under the OFSI regime and the FCA’s expectations on financial sanctions controls.
- Travel Rule compliance (Regulation 64A, in force since September 2023) for cryptoasset transfers, requiring originator and beneficiary information.
Firms also need to consider FATF typology guidance, which consistently identifies stablecoins as a primary rail for ransomware payments, sanctions evasion and high-risk-jurisdiction flows. A UKQS authorisation application without a credible Money Laundering Risk Assessment, MLRO appointment, and tested transaction-monitoring controls will not progress.
What about Consumer Duty and operational resilience?
Two further regimes apply that the op-ed commentary routinely overlooks.
Consumer Duty (PRIN 2A). Any UKQS issuer or distributor with retail customers is squarely inside the Consumer Duty. That means fair value assessments under PROD 4, target market identification, customer understanding obligations, support outcomes, and the Board-level annual assessment of customer outcomes. The “improved inclusion and lower costs” pitch in the op-eds is, in regulatory terms, a fair value question — and it has to be evidenced.
Operational resilience (SYSC 15A; PS21/3). Stablecoin issuers face a distinctive operational risk profile: smart-contract vulnerabilities, oracle failures, ledger availability, third-party validator dependency, and key-compromise scenarios. Important business services need to be mapped, impact tolerances set, and severe-but-plausible scenarios tested. The Bank of England has signalled that recovery and resolution planning will be central to the systemic regime.
When does this matter? The authorisation timeline
| Date | Event |
|---|---|
| 22 May 2026 | HMT consultation on draft SI closes |
| Q2 2026 | HMT payments services reform consultation expected |
| Later 2026 | Joint FCA/Bank of England approach document published |
| September 2026 | FCA authorisation applications open |
| Later 2026 | Bank of England draft Codes of Practice consultation |
| 25 October 2027 | Full commencement of FSMA 2000 (Cryptoassets) Regulations 2026 |
Authorisation is not a desk exercise. The FCA’s “ready, willing and organised” threshold conditions, Senior Managers and Certification Regime (SMCR) responsibilities mapping, governance and risk framework documentation, and operational resilience evidence all need to be in place before submission. For most firms, that is a six-to-nine-month preparation programme.
Where Compliance Consultant fits in
At Compliance Consultant we have advised FCA-regulated firms across investment, payments, e-money and cryptoasset perimeters since 2000. For firms preparing for UKQS issuance, custody or payment activity, our work covers:
- UKQS Authorisation Readiness Audit — a structured pre-application gap analysis against FCA threshold conditions, governance, prudential, AML and operational resilience expectations.
- Governance and SMCR design — Senior Manager Function mapping, statements of responsibility, fitness and propriety frameworks.
- AML/CTF framework build — MLRO appointment support, business-wide risk assessment, customer due diligence procedures, transaction monitoring rule design, and Travel Rule controls.
- Consumer Duty implementation — fair value assessments, target market analysis, outcomes monitoring, and Board reporting.
- Operational resilience — important business service mapping, impact tolerances, scenario testing.
Wyoming’s Frontier Stable Token is an interesting public-policy experiment. The UK is building something architecturally different and considerably more prescriptive. The firms that recognise that early — and start their authorisation readiness work now — will be the ones that reach market when the window opens.
Talk to us
If you are a payments firm, e-money institution, cryptoasset business or new market entrant considering UKQS issuance, custody or payment use, we can help you scope the regulatory pathway and build the authorisation case.
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Authoritative sources and further reading
- HM Treasury, Policy Note: Draft Statutory Instrument amending the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026, 21 April 2026.
- HM Treasury, Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (SI 2026/102).
- Bank of England, Consultation Paper: Regulatory Regime for Systemic Payment Systems Using Stablecoins and Related Service Providers, November 2025.
- Bank of England, Holding Limits Consultation Paper, 10 November 2025.
- Financial Conduct Authority, Cryptoasset Rulebook, January 2026.
- HM Treasury, Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (as amended September 2025).
- Financial Services and Markets Act 2023.
- FCA, PRIN 2A (Consumer Duty); PROD 3 and 4 (Product Governance).
- FCA, SYSC 15A and PS21/3 (Operational Resilience).
- FATF, Updated Guidance for a Risk-Based Approach to Virtual Assets and VASPs, June 2025 update.
This article is for general information only and does not constitute legal or regulatory advice. Firms should seek tailored advice on their specific circumstances.
© 2026 UK Compliance Consultant Limited (trading as Compliance Consultant). All rights reserved.
