FCA proposes MiFID-style capital requirements for crypto firms

The Financial Conduct Authority is consulting on capital requirements for cryptoasset firms. Crypto firms that have not previously had to think about regulatory capital will want to consider the consultation carefully and start to familiarise themselves with the calculations that the FCA proposes will be required under the new UK regime. The consultation closes on 31 July 2025.

Part of wider reform to UK’s prudential rulebook

The FCA’s long-term vision is to set out an integrated prudential rulebook (COREPRU) applying to all the firms it supervises. This will then be supplemented by sector-specific sourcebooks.

Some of the requirements for crypto firms will therefore be in COREPRU (e.g. overall financial adequacy rule, definition of ‘own funds’), with additional crypto sector-specific requirements in CRYPTOPRU (e.g. permanent minimum capital requirements for crypto firms).

This latest FCA consultation only covers some ground, focusing on capital requirements for issuers of qualifying stablecoins and safeguarding qualifying cryptoassets, and draws on the existing regime for MiFID firms as inspiration. The rules for other types of cryptoasset firms will follow in a later consultation.

Composition of capital

The consultation sets out what will constitute “capital” for CRYPTOPRU firms. The FCA proposes that (in common with MiFID firms) capital may be composed of a mixture of Common Equity Tier 1 (CET 1), Additional Tier 1 (AT1) and Tier 2 (T2) instruments. Importantly, the consultation proposes that firms will be required to deduct the value of any cryptoasset that it or a connected party has issued, except for any regulated stablecoins backed in compliance with the FCA’s regulatory requirements.

Capital requirements

The FCA proposes similar capital requirements as apply to UK MiFID investment firms. The FCA proposes that crypto firms will be required to hold the higher of:

• a calculated fixed overheads requirement (FOR),
• a permanent minimum capital requirement (PMR), and
• a K-factor requirement.

In broad terms, the FOR is proposed to be an amount equal to one quarter of fixed expenditure in the previous year. The FOR applies on a cross-sector basis.

For issuers of qualifying stablecoins, the FCA proposes a PMR of £350k. For custodians, the PMR is set at £150k. Where a firm undertakes both activities, the higher PMR will apply.

For K-factors:

• For qualifying stablecoin issuers, the relevant K-factor (K-SII) is proposed to be measured and calculated as 2% of the average qualifying stablecoin in issuance over a specified lookback period
• For custodians, the K-QCS calculation is proposed to be 0.04% of the average qualifying cryptoassets safeguarded. This would include the value of qualifying cryptoassets held by sub-custodians.

Where firms are also subject to MiFIDPRU, the higher PMR will apply, with the K-factor requirement being the sum of all relevant K-factors applicable across both sourcebooks.

ICARA process incoming but detail to follow

The FCA indicates that CRYPTOPRU firms will also be required to undertake an annual Internal Capital Adequacy Review Assessment process. The ICARA will determine whether they should hold additional capital or liquidity above the prescribed minimums to address risks arising from their business models. The detail will form part of an upcoming consultation. 

Liquid assets

The FCA proposes a basic liquid assets requirement (BLAR) of 1/3 of a firm’s FOR plus 1.6% of any guarantees given to clients. The consultation sets out proposals for what will constitute “core liquid assets” for this purpose. Notably, the list does not include qualifying stablecoins.

Firms issuing a qualifying stablecoin will be required to hold an “issuer liquid asset requirement”. This ILAR is intended to ensure that the firm has sufficient liquid assets on hand to account for price volatility in the backing pool, such that it can satisfy the FCA’s earlier proposal to maintain a 1:1 backing of the qualifying stablecoins minted.

The FCA proposes the ILAR must be met with on-demand deposits in the reference currency of the qualifying stablecoin, and be calculated by applying a specified charge (ranging from 0-30%) to each asset in the backing pool.

Concentration risk

The FCA proposes that all CRYPTOPRU firms will be required to monitor concentration risk, including where that risk arises from exposure to a group of connected clients. The FCA indicates that it expects that issuers of qualifying stablecoins would also carefully consider the concentration risk in the backing asset pool. The proposed rules, however, are high level and not prescriptive.

Next steps

CP25/15 on a new prudential regime for cryptoasset firms was published on 28 May 2025 alongside a separate consultation on stablecoin issuance and cryptoasset custody (read our blogpost: FCA proposes rules for stablecoin issuance and cryptoasset custody). Both consultations close on 31 July 2025.

A second consultation on remaining aspects of the prudential regime will follow later in the year or early next year. The FCA plans to finalise the regime – and all the rules from its cryptoasset consultations – in 2026.