HMT Issues Policy Note and Draft SI on Amendments to the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026

Why It Matters

The changes lower regulatory friction for stablecoin‑based payments, bolstering the UK’s fintech ecosystem ahead of broader payment‑services reforms and ensuring consumer protection where risk remains.

Key Takeaways

• UK qualifying stablecoins removed from crypto dealing activities until payment reforms
• Lending/borrowing of UKQS stays regulated to address consumer risk
• Financial promotions exemption for UKQS transactions, except lending arrangements
• Stablecoin backing assets no longer treated as collective investment schemes
• Draft SI proposes market‑making exemption and CSD safeguarding clarification

Pulse Analysis

The UK’s 2026 Cryptoassets Regulations marked a decisive step toward a clearer framework for digital assets, but early industry feedback highlighted lingering obstacles for stablecoin‑based payments. HM Treasury’s latest policy note and draft statutory instrument respond by carving out UK‑issued qualifying stablecoins (UKQS) from the crypto‑dealing and arranging activities that previously required FCA authorisation. By creating a temporary regulatory gap for UKQS payments, the government aims to align stablecoin services with the forthcoming payment‑services reforms, while still preserving oversight of higher‑risk activities such as lending and borrowing.

Key amendments also streamline related compliance burdens. Transactions involving only UKQS are exempt from the financial promotions regime, except where lending or borrowing is involved, reducing marketing friction for fintech firms. The draft also accelerates provisions that treat stablecoin backing assets as neither collective investment schemes nor alternative investment funds, removing a barrier to broader adoption across retail and institutional use cases. Meanwhile, firms offering UKQS payment services must still secure crypto‑asset safeguarding permissions, though a separate consultation will shift this requirement into the payments regime.

Beyond stablecoins, the draft SI tackles competitive dynamics in proprietary trading and market‑making, allowing firms to operate on their own account without FCA authorisation that could drive activity offshore. It also corrects an inconsistency for central securities depositories and their nominee companies, extending safeguarding exemptions to specified investment crypto‑assets. These refinements aim to preserve the UK’s edge in tokenised securities and broader crypto innovation, with the consultation closing on 22 May 2026, giving stakeholders a narrow window to shape the final rules.