UK Halves Stablecoin Capital to 1%: A Direct Challenge to MiCA

The UK has set its stablecoin capital requirement at 1% of coins in circulation, exactly half the 2% demanded under MiCA, as the Financial Conduct Authority published its final crypto rulebook in June 2026. Combined with the Bank of England scrapping its individual holding cap, London is making a calculated bid to pull stablecoin issuers away from EU-licensed rivals.

TL;DR: The FCA cut the issuer capital requirement from 2% to 1% of outstanding supply, half of MiCA’s threshold, while the Bank of England replaced the 20,000-pound individual holding limit with a 40-billion-pound per-stablecoin issuance cap. The UK regime goes live in October 2027.

What the FCA Actually Changed

The capital ratio cut grabs the headline, but the FCA’s revisions run deeper. According to the FCA’s published rulebook, the regulator removed the mandatory redemption-forecast obligation, scrapped several compulsory public disclosures, and extended the window issuers have to return funds to redeeming customers. The 1:1 asset backing requirement and statutory trust protections remain firmly in place.

David Geale, the FCA’s head of payments and digital finance, acknowledged in the regulator’s release that the initial capital guardrails were set too high relative to the actual market. The FCA frames the new framework as proportionate regulation, designed to keep London competitive. Exchanges operating in the UK will separately need to ring-fence 40% of their trading capital as a loss-absorption buffer.

The Holding Cap That No Longer Exists

Functionally, the Bank of England’s move may prove equally significant. According to Bank of England guidance, the previous 20,000-pound individual holding limit has been replaced by a 40-billion-pound issuance cap per stablecoin, with reserves split between gilts and deposits. For a corporate treasury or an institutional trading desk, a 20,000-pound ceiling was a non-starter. Removing it transforms UK-issued stablecoins into instruments viable at institutional scale.

The contrast with MiCA is stark. The EU framework’s tighter reserve and disclosure rules were designed with financial stability as the primary objective. London is betting that proportionality, not rigidity, wins the issuer race.

London, Brussels, and Washington: Three-Way Competition

The strategic intent is unmistakable: make London cheaper than Brussels and capture issuers who would otherwise operate under a MiCA-authorised entity. The same competitive logic is driving the United States, where the GENIUS Act is building a parallel federal framework for dollar-backed stablecoins.

The EU is unlikely to respond by loosening MiCA. The European Central Bank remains focused on the digital euro. Relaxing stablecoin rules would cut against that project’s rationale. The result is a clear three-way divergence: London at 1%, Brussels at 2%. Washington building its own rulebook. For issuers choosing a jurisdiction, the gap is no longer theoretical.

What Changes, and Where the Risk Sits

For issuers, the arithmetic is straightforward: a UK base requires half the capital buffer of an EU base. Two counterweights matter, though. The first is timing. The UK regime goes live in October 2027, roughly three years behind MiCA’s stablecoin rules, and the EU framework is already operational and battle-tested, as the race for CASP licences demonstrates.

The second is structural resilience. A 1% capital buffer is thinner than a 2% buffer, and leaves issuers with less room to absorb a run or a reserve shock. Lower cost means higher competitiveness, but also a shallower safety net. The competition between London, Brussels, and Washington will ultimately be decided on this trade-off: cost of capital versus depth of trust.

Investors and issuers should watch how the FCA’s October 2027 deadline interacts with any MiCA revision timetable, and whether major issuers like Tether or Circle file for UK authorisation ahead of the regime’s go-live date. That filing activity will be the clearest early signal of which jurisdiction is winning the race.

This content is for informational purposes only and does not constitute financial advice. Stablecoins carry specific risks, including those related to reserve quality and issuer solvency.