HM Treasury Draft Amendments to UK Cryptoasset Regulations to Support STABLECOIN Payments Growth

It has been reported,  21 April 2026 –

• HM Treasury has today published a draft Statutory Instrument (SI) and an accompanying policy note setting out targeted amendments to the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 (the Crypto Regime).
• HM Treasury
• Has engaged extensively with the industry following feedback on earlier drafts of the Crypto Regime.
• States that these amendments correct technical and competitive issues while maintaining a high standard of consumer protection.
• The proposals
• Address potential regulatory frictions arising from the new cryptoasset framework (which fully commences on 25 October 2027).
• Are specifically designed to facilitate the use of UK-issued qualifying stablecoins (UKQS) for payments.
• SEE APPENDIX 1 – FOR MORE INFO ON UKQS
• UKQS provide a pragmatic transitional pathway ahead of planned wider reforms to the UK payments services regime, while preserving consumer protections and supporting innovation in tokenised payments.
• These amendments signal a clear intent to position the UK as a competitive hub for stablecoin innovation and tokenised payments while the full regime beds in.  

The devil is in the details as ever with regulatory fine-tuning, but here are some key development areas

Key Developments:

• Carve-out for UK-ISSUED STABLECOINS (UKQS) from dealing and arranging activities:
• Firms using UKQS for payments will not require authorisation for the new regulated activities of dealing in qualifying cryptoassets (as principal or agent) or arranging deals.
• This avoids the need for dual crypto and payments authorisations in the interim. Lending and borrowing activities involving UKQS remain in scope to enable the FCA to address associated consumer risks.
• Safeguarding (custody) permissions still required:
• Firms that safeguard, or arrange the safeguarding of, UKQS (or other cryptoassets) on behalf of others will continue to need cryptoasset custody permissions under the regime (regulation 9N).
• A technical clarification confirms that temporary settlement exclusions do not apply to UKQS payment activity.
• HM Treasury has signalled it will consult on moving such safeguarding into the future payments regime for a streamlined transition.
• Financial Promotions (FinProms) regime aligned:
• Pure UKQS transactions (i.e., those not involving other cryptoassets) are excluded from the financial promotions regime, except where lending or borrowing is involved.
• The regulated activity of issuing a qualifying stablecoin has been added to the Financial Promotions Order.
• Early clarification on backing assets:
• Stablecoin reserves backing UKQS will not be treated as collective investment schemes (CIS) or alternative investment funds (AIFs).
• These carve-outs are being activated early to remove barriers to adoption and associated services.
• Market-making exemption for proprietary trading:
• UK firms providing liquidity on their own account (proprietary trading/market making) will benefit from an exemption.
• This ensures domestic firms are not disadvantaged relative to overseas liquidity providers when servicing UK authorised cryptoasset trading platforms.
• CSD technical fix:
• The amendments extend existing safeguarding exemptions for Central Securities Depositories (CSDs) and their nominee companies to cryptoassets.
• This supports the development of tokenised securities without unintended authorisation burdens.
• Transitional approach ahead of payments reform:
• The changes are explicitly interim in nature.
• They are intended to enable stablecoin payments to scale without dual authorisation requirements before the completion of broader payments services reforms (with consultation planned in Q2 2026).

Be aware

• Firms undertaking UKQS-only services (without other FSMA permissions) may still need to register under the Money Laundering Regulations.

Next Steps

• The consultation on the draft SI is open until 22 May 2026. HM Treasury will consider responses before finalising the legislation. Further consultations on payment services modernisation (including the integration of stablecoins) are expected shortly.

Official Documents

• Policy Note: https://assets.publishing.service.gov.uk/media/69e63339de262afd82fcf96e/Policy_note.pdf
• Draft SI and full publication page: https://www.gov.uk/government/publications/policy-note-draft-statutory-instrument-amending-the-cryptoasset-regulations

APPENDIX 1

UKQS-only services (sometimes referred to as “pure UKQS transactions” in the official documents) are financial services or activities that involve only UK-issued qualifying stablecoins (UKQS)  and no other cryptoassets.

What are UKQS?

UKQS = UK-issued qualifying stablecoins. These are fiat-referenced stablecoins (e.g. pegged to GBP, USD, or EUR) that are:

• Issued in the UK by a firm that is FCA-authorised specifically for the regulated activity of “issuing a qualifying stablecoin”.
• Backed by high-quality reserves (cash or very safe assets).
• Designed to maintain a stable value and be used for payments/settlement.

What counts as a UKQS-only service? Examples include:

• Exchanging fiat currency for UKQS (or vice versa) purely for payments.
• Sending or receiving UKQS as a payment method.
• Providing payment services or transfers that use only UKQS (no mixing with Bitcoin, Ethereum, or any non-UKQS crypto).
• Market-making or liquidity provision that is limited exclusively to UKQS.

In short:

• If the firm’s activity never touches any cryptoasset other than UK-issued qualifying stablecoins, it qualifies as a UKQS-only service.

Why does this matter under the new rules? (The carve-outs)

• HM Treasury’s draft Statutory Instrument (published 21 April 2026) deliberately gives UKQS-only services a lighter regulatory touch on a transitional basis.
• This is to let stablecoin-based payments grow quickly before the full UK payments-services regime is updated (expected 2027).

Key reliefs for UKQS-only firms:

• No need for crypto “dealing” or “arranging” permissions — Firms are carved out of the new regulated activities of:
• Dealing in qualifying cryptoassets (as principal)
• Dealing in qualifying cryptoassets (as agent)
• Arranging deals in qualifying cryptoassets
• Financial promotions (FinProms) rules largely do not apply to pure UKQS transactions (the only exception is lending/borrowing involving UKQS).
• This avoids “dual authorisation” headaches (i.e. needing both crypto permissions and payments permissions) during the interim period.

What rules still apply? (No complete free pass)

Even with the carve-outs, UKQS-only services are not unregulated:

• Safeguarding/custody — If the firm holds or arranges the safeguarding of UKQS on behalf of customers, it still needs full cryptoasset custody authorisation (this permission is not carved out).
• AML registration — Firms that provide UKQS-only services and have no other FSMA permissions must still register with the FCA under the Money Laundering Regulations (MLRs). This is the standard AML/CTF registration that applies to cryptoasset businesses.
• Issuance — Actually issuing the UKQS itself remains a separate, fully regulated activity requiring FCA authorisation.
• Lending/borrowing activities involving UKQS stay within the regulated perimeter so the FCA can protect consumers.

Bottom line

• “UKQS-only services” is the regulatory shorthand for the narrow slice of the market that HM Treasury wants to encourage right now: simple, payments-focused use of well-regulated UK stablecoins.
• The carve-outs remove unnecessary friction so these services can scale ahead of the bigger payments reform, while still keeping core protections (custody rules + AML) in place.
• This is all explained in HM Treasury’s Policy Note and the draft SI (links in the original briefing). The consultation closes on 22 May 2026 if you want to share your views.