The UK Financial Conduct Authority’s Plan to Recover Costs from Stablecoins and Crypto

The UK Financial Conduct Authority (FCA) recently made an announcement regarding its intention to recover approximately $8 million in costs associated with the supervision of stablecoins and cryptocurrencies. The funds, totaling £6.4 million, will be obtained through fees imposed on stablecoin issuers and digital asset custodians. This move by the regulator is primarily to cover £6.2 million related to new stablecoin regulations and a wider regime, along with an additional £0.2 million for extending the financial promotions perimeter.

While the focus of the announcement is on recovering costs related to crypto regulation, the FCA’s annual business plan goes beyond just that. The agency plans to deliver a proportionate market abuse regime for digital assets and continue its financial promotions regime for the crypto sector. Moreover, the plan includes broader regulatory objectives such as regulating digital markets and evaluating the impact of AI on markets.

Context for Regulatory Developments

The costs associated with new regulations reflect the FCA’s push towards stablecoin regulation, which began in November 2023. Additionally, the upcoming market abuse regime for digital assets builds on existing rules introduced in 2016, which initially did not target the crypto sector. However, discussions about extending these rules to crypto have been ongoing since at least February 2023.

The FCA’s enforcement of financial promotion rules in the crypto sector in October 2023 has had consequences. Some crypto firms have opted to withdraw from the UK market due to the challenges posed by compliance requirements, while others have found themselves on a warning list. This indicates the shifting landscape of regulation in the crypto space and the need for firms to adapt to changing rules and expectations.

The FCA’s plan to recover costs related to stablecoins and crypto regulation reflects a broader effort to enhance oversight and compliance in the digital asset space. By imposing fees on stablecoin issuers and digital asset custodians, the regulator aims to cover the costs of implementing new regulations and extending its regulatory perimeter. As the regulatory landscape continues to evolve, firms operating in the crypto sector will need to stay vigilant and adaptable to navigate the changing regulatory environment effectively.