We welcome the clarifying amendments regarding stablecoins proposed in this latest Quarterly Consultation Paper from the FCA. These changes form part of the broader, evolving UK framework for cryptoasset regulation, including the new regime for stablecoin issuance and safeguarding, and the continued refinement of the Client Assets Sourcebook.

As this framework has developed, we have argued that it is important to acknowledge the difference between a firm which has title to the cryptoassets (which can be described as “holding control”) versus a firm with access to the private cryptographic keys (often described as “non-holding control”). These proposals helpfully recognise this distinction through the FCA’s clarifications of when CASS 17 (rules on custody and safeguarding) versus CASS 8 (rules on mandates and delegated authority) would apply.

We also welcome the clarification explicitly setting out that backing assets for qualifying stablecoins are only subject to CASS 16 (the regime introduced to cover stablecoin issuance), and excluded from CASS 7 (existing rules on protecting client money). This helpfully removes potential for any confusion or overlap.

Looking ahead, and as emerging hybrid arrangements continue to evolve (such as multi-party computation (MPC), multi-signature structures and smart contract escrow) it will also be helpful for future discussions and guidance to consider how the CASS framework applies to these models of shared or distributed control.