UK Treasury’s draft crypto regime is more permissive than the rumour mill suggested
HM Treasury's draft SI on cryptoasset activities, published 16 June 2026, takes a lighter approach than MiCA on stablecoin reserves, custody, and prudential capital. Tulip Siddiq's note explains why.
On 16 June 2026, HM Treasury published the draft Financial Services and Markets Act 2000 (Regulated Activities) (Cryptoassets) Order 2026, together with a 94-page explanatory consultation document titled “Future financial services regulatory regime for cryptoassets — final policy statement and draft SI”. The introductory note is signed by Tulip Siddiq, the Economic Secretary to the Treasury, who took the cryptoassets file from Bim Afolami in the July 2024 reshuffle and has been the responsible minister through three rounds of consultation. The draft SI is the long-awaited operative text that converts the policy proposals first set out in the February 2023 consultation into a binding regulatory perimeter. It will be laid before Parliament in the autumn for the affirmative resolution procedure, with the regime expected to come into force on 1 April 2027.
The pre-publication briefing cycle suggested HM Treasury would land somewhere close to MiCA: hard reserve composition rules, mandatory custody segregation for client assets, prudential capital requirements scaled to issuance volume. The draft does not do that. It is, in three specific places — fiat-backed stablecoin reserves, client asset custody, and the prudential treatment of CASP firms — materially more permissive than the EU regime. What is at stake is whether the UK can credibly position itself as a regulated jurisdiction that is also commercially competitive with Dubai, Singapore, and the post-GENIUS Act US, without sliding into the “regulated but unsupervised” middle ground that Cyprus and Malta occupied in the 2017–2021 ICO era. The draft tries to do that. Whether it succeeds depends on how the FCA writes the Level 2 sourcebook chapters over the next nine months.
What the draft SI actually does
The legal mechanism is the standard UK approach: amend the FSMA Regulated Activities Order 2001 to add seven new regulated activities — issuance of fiat-backed stablecoins, custody of cryptoassets, operation of a cryptoasset trading venue, dealing in cryptoassets as principal, dealing in cryptoassets as agent, arranging deals in cryptoassets, and operating an automated cryptoasset trading system — and then bring those activities within the existing FSMA authorisation perimeter under Part 4A. Once an activity is regulated, the standard FCA rulebook applies: PRIN, SYSC, the new CASS chapter (CASS 18) drafted specifically for crypto custody, and the conduct rules under COBS. The drafting is technically clean. It re-uses three decades of FSMA case law and supervisory practice rather than trying to build a parallel regime.
The fiat-backed stablecoin reserve rule in draft Article 9D is where the divergence from MiCA begins. The UK rule requires reserves of at least 100% of the value of tokens in circulation, segregated as client money under a new CASS sub-regime, and held in one of four categories: deposits with UK or equivalent-jurisdiction banks, UK Treasury bills with residual maturity under twelve months, deposits with the Bank of England, or units in a UK-authorised qualifying money market fund. Notably absent: any specific minimum proportion that must sit in bank deposits as opposed to T-bills. MiCA Article 36 read with the EBA RTS sets that floor at 30% for non-significant EMTs and 60% for significant ones; the UK draft lets the issuer choose its own mix, subject to a general liquidity test under the new SYSC requirements. That is a meaningful concession to yield economics, and it explains why Circle’s UK subsidiary went quiet in the consultation rounds and then very public in supporting the final draft.
Where the UK and EU regimes diverge in practice
| Requirement | EU (MiCA Title IV) | UK draft SI 2026 |
|---|---|---|
| Reserve composition floor (bank deposits) | 30% non-significant / 60% significant | No minimum; issuer discretion within four eligible categories |
| Non-GBP/EUR stablecoin volume cap | €200m/day, 1m txn/day (Art. 58) | No cap |
| Custody segregation | Title V Art. 75; mandatory segregation | CASS 18, mandatory but with omnibus accounts permitted subject to disclosure |
| Prudential capital (CASP / VASP) | €50k–€150k initial; ongoing 0.02–0.25% of customer assets | £100k initial; ongoing per IFPR K-factor methodology, generally lighter |
| Authorisation routes | Single competent authority + ESMA passport | FCA Part 4A authorisation, no equivalence regime yet |
| Algorithmic stablecoins | Prohibited as a marketable product (Art. 19(2)(b)) | Out of perimeter; not regulated, not prohibited |
| White paper requirement | Mandatory, approved by NCA | Disclosure required, no pre-approval |
Custody: the CASS 18 quiet surprise
The most operationally consequential provision in the draft is paragraph 4 of new CASS 18, which permits custodians to hold client cryptoassets in omnibus wallets — wallets that pool multiple clients’ assets under a single on-chain address — provided the custodian maintains internal ledgering that allows reconstruction of each client’s beneficial entitlement on a real-time basis, and provided the omnibus arrangement is disclosed in the client terms. MiCA does not prohibit omnibus custody either, but the ESMA Level 3 Q&A 2025_7501 has effectively pushed EU custodians toward segregated wallets per client, on the basis that omnibus arrangements complicate insolvency segregation under Article 75. The FCA’s consultation paper CP 26/12, published alongside the draft SI, takes the opposite view: omnibus is operationally cheaper, the segregation question is resolved by the ledgering obligation, and the UK insolvency carve-out for client assets under the Investment Bank Special Administration Regulations 2011 already handles the pooling question.
In practice that means a UK-authorised custodian — Coinbase Custody International, Komainu, Anchorage’s planned London entity — can run a fundamentally cheaper operational model than its EU equivalent. The cost differential is not negligible. Per-wallet gas costs, plus the operational overhead of generating, signing for, and reconciling tens of thousands of individual on-chain addresses, add somewhere in the region of 4–8 basis points to a fully-segregated custody fee versus an omnibus model. For a fund running $2 billion in crypto under custody, that is real money. It is also the kind of detail that does not show up in the press release but will show up in the choice of London versus Frankfurt for a custody hub in 2027.
Prudential treatment: lighter, but not light
The draft applies the Investment Firm Prudential Regime (IFPR), implemented in 2022 to onshore the EU’s IFR/IFD framework, to CASP firms. That means K-factor-based ongoing capital — K-AUM (assets under management), K-ASA (assets safeguarded and administered), K-CMH (client money held), and the new K-CAS (cryptoassets safeguarded) factor specifically introduced in the draft — replaces the percentage-of-customer-assets formula in MiCA Annex IV. For most mid-sized firms, the IFPR calculation produces a lower ongoing capital number than MiCA. The Bank of England’s Prudential Regulation Authority retains a backstop power to impose individual capital guidance under SS 31/15 if a firm’s risk profile warrants it, which preserves supervisory flexibility without locking a minimum into primary legislation.
There is no UK equivalent of the MiCA Article 58 transaction cap on non-domestic-currency stablecoins. A USD-denominated stablecoin authorised in the UK can be issued without volume limit, subject only to the general reserve and conduct requirements. The political economy explanation, given semi-publicly by Treasury officials at the Bank of England’s June Financial Stability Roundtable, is that sterling is not under threat of monetary substitution by a USD stablecoin in the way the euro arguably is, given the depth of the sterling money markets and the absence of any cross-border use case where a UK retailer would prefer to settle in USDC rather than GBP. That is probably right today. Whether it will still be right in 2030 if a US-chartered USD stablecoin reaches the velocity that the GENIUS Act enables is a separate question. The draft SI does not address it.
Why the rumour mill got it wrong
The pre-publication consensus on Crypto Twitter, in trade publications, and in the more excitable corners of the City legal market was that HM Treasury would converge on MiCA in substance because the political pressure to “match Brussels” was insurmountable. That reading misjudged three things. First, it underestimated the influence of the Chancellor’s Mansion House agenda, which since November 2025 has pushed all UK financial services regulation toward a “secondary growth and international competitiveness objective” — codified in Section 25 of the Financial Services and Markets Act 2023 — that the FCA and PRA are now obliged to weigh against safety and soundness. Second, it overestimated the operational similarity between the UK’s existing FSMA architecture and MiCA’s bespoke framework; in practice, layering MiCA-style rules onto the UK CASS regime would have been clumsy and is not what FCA technical staff wanted. Third, it underestimated the lobbying coordination between Circle, Coinbase, the UK Cryptoasset Business Council, and the LSE Group, all of whom made the same five-point case across three rounds of consultation.
The case they made was, in compressed form: tell us what you want regulated (the perimeter), tell us the conduct rules, give us a recognised supervisor, and do not invent volume caps or unique reserve rules that we cannot operate against. That is roughly what the draft delivers. There are still real obligations — the FCA’s authorisation gateway is not a rubber stamp, and the new CASS 18 will require non-trivial systems investment from any custodian that has been running a lighter offshore model — but the framework is recognisable to anyone who already operates as an authorised firm in the UK. That is a deliberate choice.
What to watch over the next nine months
- FCA Policy Statement PS 26/8, expected October 2026, which will finalise CASS 18 and the new COBS chapter for cryptoasset distribution. Watch for the financial promotions rule alignment with the existing cryptoasset promotion regime in force since October 2023.
- PRA SS 26/3, the supervisory statement on prudential expectations for stablecoin issuers, which will determine whether the issuer-discretion reserve rule in draft Article 9D survives contact with the PRA’s own thinking on liquidity risk.
- Affirmative resolution in Parliament, scheduled for the autumn session. The SI requires both Houses to approve. Opposition amendments are likely on the algorithmic stablecoin carve-out and on the absence of a volume cap on non-GBP stablecoins, but the votes are not there to defeat the SI.
- FCA gateway opening, expected 1 April 2027. The transitional regime under draft Schedule 3 gives existing FCA-registered cryptoasset firms a six-month window to apply for full Part 4A authorisation. Those that miss the window cannot continue regulated activities.
For traders and treasury teams tracking UK-side liquidity formation, the practical question is which CASPs apply for London authorisation first, and what that does to GBP-denominated spot order books on the major venues. We will be updating the regulatory calendar on the events page as the FCA’s policy statement and supervisory statements are published, and tracking the GBP stablecoin reserve composition disclosures on the peg monitor once the regime is operative. The market dashboard at /market/ already tracks the four GBP-denominated stablecoin candidates currently in pre-launch with UK affiliates. Read the draft SI itself on gov.uk — it is 41 pages, technical but readable, and considerably more interesting than the press summary suggested.
Anneke de Vries is hoge.gg’s Regulation Lead. She spent five years at ESMA and follows UK financial services rule-making from outside any commercial advisory relationship with the firms mentioned.