HMT seeks feedback on draft SI amending the 2026 Cryptoasset Regulations

HM Treasury (HMT) has published the draft Financial Services and Markets Act 2000 (Cryptoassets) (Amendment) Regulations 2026 and a policy note proposing targeted changes to the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026. The draft statutory instrument (SI) seeks to address unintended consequences of the cryptoasset regime and support the interim use of UK‑issued qualifying stablecoins (UKQS) for payments ahead of wider payments services reforms announced in a related press release. The reforms are expected to bring UKQS payment services into the regulated payments perimeter.

The draft SI carves out transfers and exchanges of UKQS from the cryptoasset dealing and arranging activities, while keeping UKQS lending and borrowing within scope so that the UK Financial Conduct Authority can address associated consumer risks through new rules. The government acknowledges this may create frictions for using UKQS in collateral arrangements and intends to mitigate these in the final SI, informed by feedback. The government also recognises that cross‑border payments are a key use case for stablecoin payments. While UKQS would be taken out of the dealing and arranging perimeter, overseas‑issued stablecoins would remain in scope. These issues will be explored further during the consultation period on this SI.

HMT reiterates that firms providing UKQS payment services will still require cryptoasset safeguarding permissions under regulation 9N where they safeguard (or arrange the safeguarding of) cryptoassets. It confirms it will consult separately on moving safeguarding carried out in the course of payment services into the payments regime under the upcoming reforms. While this may leave interim frictions for some UKQS firms, the government considers this approach proportionate to ensure FCA supervision and consumer protection ahead of the transition to the new payments regime.

The draft SI also:

• Clarifies that the temporary settlement exclusion from cryptoasset safeguarding applies only to activity ancillary to dealing or arranging, and does not apply to UKQS payment services.
• Makes consequential amendments to the financial promotions perimeter, generally excluding UKQS‑only transactions other than lending and borrowing, and adds issuing a qualifying stablecoin as a new regulated activity under the Financial Promotions Order.
• Brings forward exclusions for stablecoin backing assets so they are not treated as collective investment schemes or alternative investment funds, while noting that UKQS‑only firms who do not hold a FSMA permission may still need to register under the FCA's Money Laundering Regulations Gateway.
• Proposes an exclusion to allow UK firms to provide market‑making services without being disadvantaged relative to overseas liquidity providers.
• Etends existing exemptions for central securities depositories and nominee companies to specified investment cryptoassets to reduce barriers to tokenised securities.

The deadline for feedback on the draft amending SI is 22 May.

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