UK Carves Out Stablecoin Payment Exemption, Tightens Rules

HM Treasury laid a draft regulation before Parliament on Sept. 15, 2026, that would exempt routine transfers and some exchanges of UK qualifying stablecoins from rules on dealing as principal, dealing as agent and arranging deals, while retaining regulation of return‑right lending, swaps into other cryptoassets and ongoing custody.

The exemption applies only to tokens that qualify as UK qualifying stablecoins under the regulated article 9M activity and are issued by a firm that holds the required permission. Tokens issued overseas or tokens that merely track sterling do not qualify on that basis alone.

Under the draft, a simple payment — sending a UK qualifying stablecoin to another person — could fall outside the dealing and arranging rules. Exchanging a qualifying stablecoin for money or for another UK qualifying stablecoin can also be excluded from those dealer duties.

The exemption does not apply where a transfer resembles financing or trading. If the recipient has a right or obligation to return the stablecoin later, the transfer is not excluded and the activity may be regulated as lending or borrowing if the relevant activity tests are met.

Swaps that convert a qualifying stablecoin into other cryptoassets, such as Bitcoin, remain within the regulatory perimeter and are not covered by the payment carve‑out. The draft introduces a wholesale‑style exception for certain title‑transfer collateral and repo arrangements involving qualifying stablecoins; that exception is limited to cases where the original holder is neither a consumer nor a person in a category specified by the Financial Conduct Authority.

On custody, the draft adds a safeguarding provision that excludes temporary holding of a qualifying stablecoin when that holding is directly connected with executing a payment. The temporary settlement relief does not cover ongoing custody: firms that maintain customer wallets or provide continuing custody services remain subject to safeguarding rules and may need permission for safeguarding activity.

The financial‑promotion rules are broadly aligned with the transfer, exchange and collateral exclusions but are not identical. Promotional relief does not apply to arrangements that require the stablecoin to be returned, so some lending‑style products and offers remain subject to financial‑promotion requirements.

The amendments to dealing, arranging and financial‑promotion rules are drafted to take effect on Oct. 25, 2027, the date the Financial Conduct Authority expects the new crypto regime to start. Other changes made under regulation 4 would begin once the instrument is made. Parliament must approve the draft before it becomes law, and separate HM Treasury work on payments reform will set longer‑term rules for stablecoins used in payments.

Firms that issue, move, accept or custody qualifying stablecoins will need to assess whether their products and services meet the draft’s qualifying conditions and whether they remain within regulated activities.