UK to lower stablecoin capital buffers, undercutting EU's MiCA requirements

The U.K.'s Financial Conduct Authority (FCA) reduced the proposed capital requirements for stablecoin issuers as it set out its formal guidance for cryptocurrency regulations.

The financial services regulator cut the amount of financial backing that needs to be set aside to 1% of the total value of the stablecoins they issue. It was previously 2%.

The change "makes the prudential framework more proportionate for larger issuers while maintaining the robustness of the overall regime," the FCA said in a new framework document published Tuesday.

The proposed requirement is lower than the 2% equivalent stipulation under the European Union's Markets in Crypto Assets (MiCA) regulation.

The FCA's aim is to simplify key elements of the regime to make it more workable in practice, it said in a statement.

The loosening follows the Bank of England's (BOE) reversal of its proposal to limit the value of stablecoins an individual can hold, abandoning plans to impose a 20,000-pound ($26,500) cap.

Major financial markets around the world have been setting out formal regulatory regimes for the oversight of crypto assets in recent years, with stablecoins emerging as one the most significant areas of interest.

The FCA also aims to simplify the framework for crypto exchanges. Under the new rules, they will need to set aside 40% of their trading capital to cover potential losses and apply a 40% potential loss to the value of their collateral when lending or trading with other parties.

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