The United Kingdom’s Financial Conduct Authority (FCA) has requested public feedback on proposed regulations for stablecoins and cryptocurrency custody.

In a May 28 request for comment, the United Kingdom’s financial regulator announced that its regulatory proposals are “the latest milestone on the road to crypto regulation.” The draft rules are based on prior roundtables and industry feedback. David Geale, executive director of payments and digital finance at the FCA, said the agency aims to support innovation while ensuring market trust:

“At the FCA, we have long supported innovation that benefits consumers and markets. At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”

The FCA also noted it will work with the UK’s central bank to regulate stablecoins. Bank of England Deputy Governor Sarah Breeden said, “For those stablecoins that expect to operate at systemic scale, the Bank of England will publish a complementary consultation paper later this year.”

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Ensuring stablecoins remain stable

The FCA said that its rules “aim to ensure regulated stablecoins maintain their value.” The regulator said customers must be clearly informed about how the backing assets are managed. It also recommended that stablecoin issuers appoint independent third-party custodians to hold reserve assets:

“We propose to require issuers to provide holders with the right to redeem qualifying stablecoins at par value with the reference currency, irrespective of the value of the backing assets portfolio, with a payment order placed to an account in the name of the holder at the latest by the end of the business day following receipt of a valid request.“

Breeden added that the FCA’s proposals are part of a broader effort to build the UK’s stablecoin regime.

Related: UK to require crypto firms to report every customer transaction

Crypto custody rules incoming

The FCA’s proposals also introduce new requirements for firms providing crypto custody services, as outlined in a separate discussion paper. The rules are designed to ensure that user assets are secure and can be accessed at any time:

“The FCA’s proposals would require firms providing crypto custody services, who have responsibility for keeping consumers’ crypto safe, to ensure they are effectively secured and can be easily accessed at any time.“

Proposed measures also aim to reduce both the likelihood and impact of crypto firms failing, both in the crypto custody and stablecoin sectors. The ongoing efforts also follow the recent revelation by UK Chancellor of the Exchequer Rachel Reeves of plans for a “comprehensive regulatory regime” aimed at making the country a crypto leader.

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Ripple, the blockchain company behind XRP, argued that fungible cryptocurrencies are not securities when transferred in secondary transactions in a recent letter sent to the US Securities and Exchange Commission (SEC).

In its May 27 letter, Ripple cited US attorney and crypto law thought leader Lewis Cohen to support its claim. In his widely cited 2022 paper, “The Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are Not Securities,” he wrote:

“[T]here is no current basis in the law relating to ‘investment contracts’ to classify most fungible crypto assets as ‘securities’ when transferred in secondary transactions.”

In his paper, Cohen explained that in secondary transactions, an investment contract transaction is generally not present. He further claimed that fungible cryptocurrencies “neither create nor represent the necessary cognizable legal relationship between” a legal entity and the holder that is the “hallmark of a security.”

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SEC’s “new paradigm”

Ripple also referenced SEC Commissioner Hester Peirce’s May 19 “new paradigm” speech. She said she’d been voicing her dissent with the regulator’s approach to crypto, adding:

“Having emerged from the crypto dissent years, I am glad to be able speak to you today as the head of the Commission’s Crypto Task Force about a rational and coherent path forward and a new paradigm at the SEC.”

Peirce said that the SEC’s “approach to crypto in recent years has evaded sound regulatory practice and must be corrected.” She also said that most cryptocurrencies are not securities, adding:

“Most currently existing crypto assets in the market are not [securities]. My supplemental answer is that economic realities matter and non-security crypto assets may be distributed as part of an investment contract, which is a type of security.”

Ripple’s long fight with the SEC

The SEC had viewed a large portion of digital assets as securities, with the regulator’s former chair, Gary Gensler, stating in 2023 that most of the crypto market falls under the securities bracket. This stance led to a protracted legal battle between the SEC and Ripple.

The lawsuit first began at the end of 2020, when the SEC took action against Ripple and its executives, claiming that XRP sales constituted unregistered security offerings. Still, after the government’s stance on crypto changed with the election of current US President Donald Trump, Ripple has mostly won the battle, with the SEC recently dropping its appeal against a ruling favorable to the company.

In its recent letter to the SEC, Ripple also cited a ruling in the case noting that “the court held that certain of Ripple’s historical institutional sales of XRP were investment contracts,” while the secondary sales were not. Furthermore, the judge “determined that XRP itself is not a security.”

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Australia’s markets regulator has filed civil proceedings against Liang “Allan” Guo, the former director of Blockchain Global. 

Guo will face the court on “allegations relating to multiple breaches of his directors’ duties,” the Australian Securities and Investments Commission said in a May 28 press release.

ASIC alleged Guo made multiple breaches of directors’ duties relating to his dealings with ACX Exchange customer funds, and claimed he made false and misleading statements about those dealings and failed to maintain proper books and records. 

The now-liquidated Blockchain Global operated the ACX Exchange from mid-2016 until December 2019, when it collapsed as customers could no longer withdraw their assets. 

During liquidator’s examinations in 2022, the courts were told that ACX exchange took the cash invested by its customers to buy crypto and mingled the funds into one pooled fund, the Sydney Morning Herald reported at the time. 

The liquidators of Blockchain Global estimate that the company owed over 20 million Australian dollars ($12.8 million) in unsecured creditor claims to former customers of the ACX Exchange, ASIC said.

In November 2023, liquidators reported that Blockchain Global had 58.6 million Australian dollars ($37.7 million) owed to unsecured creditors. Of that total, 22.7 million Australian dollars ($14.6 million) were unsecured creditor claims received from former customers of the crypto exchange.

Guo not in country, ASIC says

ASIC said it began investigating Blockchain Global in January 2024 following the liquidators’ report. 

Related: Australia outlines crypto regulation plan, promises action on debanking

Guo was banned from leaving the country as the regulator investigated whether he committed any criminal offences, including transferring money from the collapsed exchange to pay his mortgage.

Guo left Australia in September 2024 after travel restraint orders expired, and he hasn’t returned, it noted. 

Meanwhile, ASIC is seeking the High Court’s permission to appeal a lower court’s ruling in favor of fintech firm Block Earner in a separate case. 

The regulator claimed the crypto company’s fixed-yield earning service was not a financial product.

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