UK opens a major loophole for stablecoin payments while clamping down on crypto lending

HM Treasury has laid a final draft of amendments to the Financial Services and Markets Act 2000 that would narrow the regulatory perimeter for UK qualifying stablecoin payments. The draft, presented to Parliament on 15 September, proposes to exclude certain stablecoin transfers from the dealer, agent and arranging rules.

Scope of the payment exemption

The exemption applies only to stablecoins that qualify under article 9M, meaning they must be issued by a firm holding the relevant permission. Tokens issued overseas or merely pegged to sterling would not automatically qualify.

Sending a qualifying stablecoin to another person, or exchanging it for cash or another qualifying stablecoin, could fall outside the dealer perimeter. However, if the transaction resembles financing—such as when the recipient must return the stablecoin later—the exemption does not apply, and the activity may be regulated.

Activities that remain regulated

• Swapping a qualifying stablecoin for other cryptoassets, including Bitcoin.
• Lending or borrowing that involves an obligation to return the stablecoin.
• Long‑term custody of stablecoins, such as maintaining a customer wallet.

Additional exceptions

A wholesale‑style exception is introduced for title‑transfer collateral and repo arrangements involving qualifying stablecoins, provided the original holder is not a consumer or a category specified by the FCA.

Temporary holding of a qualifying stablecoin linked to payment execution would also be excluded from safeguarding requirements, but longer‑term custody would not receive this relief.

Implementation timeline

The dealing, arranging and financial‑promotion amendments are drafted to start on 25 October 2027, coinciding with the FCA’s new crypto‑firm regime. Other amendments would take effect after the instrument is made, pending parliamentary approval.