UK stablecoin issuer warns FCA capital rule could destabilize pegs

A UK stablecoin issuer is pushing back against a key plank of the Financial Conduct Authority's newly finalized crypto rulebook, warning that a capital requirement tied to issuance volumes could trigger the very instability regulators are trying to prevent.

Tom Rhodes, chief legal officer at Agant, writing for @OMFIF, argues the rule introduces a structural flaw into an otherwise broadly welcomed framework. Rhodes published his analysis on 7 August 2026, noting that while the regime is being recognized as sophisticated and balanced, it imposes consequential departures from the traditional stablecoin business model.

The Capital Requirement in Question

At the center of Rhodes' concern is what the FCA calls an issuance-linked "own funds" capital requirement, set at 1% of total stablecoins in circulation, known as the K-SII requirement. Rhodes argues the rule borrows a prudential tool designed for banks and investment firms but applies it poorly to stablecoin issuers whose backing assets already sit in segregated trusts, meaning the capital charge does not map to any real underlying risk.

In earlier written evidence to Parliament, Agant argued the requirement serves no purpose and would increase financial stability risk, because it scales directly with demand for the stablecoin rather than with the firm's actual risk profile.

The practical consequence, Rhodes warns, is straightforward. An issuer approaching its equity ceiling would have to pause new issuance while raising fresh capital. Strong early market traction could force an issuer to pause issuance in order to conduct multiple capital raises, risking destabilization of the stablecoin by preventing supply from meeting demand. That supply squeeze, he argues, would either push the secondary market price above peg or prompt holders to sell, driving the price below it.

How the UK Rule Compares

The FCA is not alone in imposing such a requirement: the EU's Markets in Crypto-Assets regulation sets the equivalent charge at 2% for European issuers, and the FCA reduced its own proposal from 2% to 1% following industry consultation. In practical terms, the revised rate means a stablecoin issuer with $1 billion in circulation must hold $10 million in reserve capital instead of $20 million.

The FCA said the reduction from 2% to 1% is intended to make the framework more proportionate for larger issuers. The final rulebook brings exchanges, wallets, custodians, staking services and qualifying stablecoin issuers into a full authorization regime, replacing a model built largely around anti-money-laundering registration. Firms seeking to carry out regulated crypto activities in the UK will need FCA approval, with applications opening on September 30, 2026, and the regime expected to take effect on October 25, 2027.

The debate reflects a broader tension in UK stablecoin policy: how to build a credible, institutionally robust framework without inadvertently constraining the very issuers it is designed to bring onshore.

Sources
OMFIF: FCA framework departs from traditional stablecoin model, Tom Rhodes (August 2026)
CoinDesk: UK's FCA lowers stablecoin capital buffers to 1%, undercutting the EU's MiCA (June 2026)
UK Parliament: Agant written evidence on stablecoin capital requirements (STA0060)