UK Carves Stablecoin Payments Out of Dealer Rules, Tightens Lending Lines

A Narrow Opening, Not a Blanket Pass

HM Treasury laid the final draft of the Financial Services and Markets Act 2000 (Cryptoassets) (Miscellaneous Amendments) Regulations 2026 before Parliament on September 15, drawing a careful line between stablecoin payments and the activities that will still require full regulatory authorization. The instrument has not been made and is not yet in force, but its structure already signals where the UK intends to draw the boundary between permissible payment activity and regulated financial dealing.

The relief the draft creates is deliberately contained. A “UK qualifying stablecoin” must be issued through the regulated article 9M activity by a firm that already holds the relevant permission. An overseas-issued token does not qualify on that basis alone, and a coin that merely tracks sterling without meeting the issuance test falls outside the definition just the same.

What Falls Outside the Dealer Perimeter

The draft would remove qualifying transfers from three specific regulated activities: dealing as principal, dealing as agent, and arranging deals. Under this framework, sending a UK qualifying stablecoin to another person could fall outside the dealer perimeter entirely. So could exchanging it for money or for another UK qualifying stablecoin.

That boundary shifts, however, the moment a transaction starts to resemble financing. If the recipient holds any right or obligation to return the stablecoin at a later point, the basic exclusion does not apply. Ordinary lending and borrowing arrangements, when they meet the underlying activity tests, remain potentially regulated. This is not a technical detail buried in the small print – it is the mechanism through which the UK plans to prevent stablecoin payment rails from becoming an unlicensed crypto credit market.

Swapping a UK qualifying stablecoin for a different category of cryptoasset – Bitcoin, for instance – also stays outside the payment carve-out. The exclusion is drawn around payment-like transfers, not around crypto trading dressed up as settlement. The final text adds a separate exception for some title-transfer collateral arrangements and repo transactions involving qualifying stablecoins, which can apply when the original holder is neither a consumer nor a person in a category the Financial Conduct Authority specifies.

Financial promotion rules governing marketing broadly follow the same contours as the dealing and arranging exclusions, though the coverage is not identical. Arrangements that require a stablecoin to be returned at any point do not receive the basic promotion exemption, meaning firms cannot advertise those products under the same carve-out they use for straightforward transfers.

Temporary Custody Gets Its Own Relief

A new safeguarding provision addresses the situation that payment processors face during execution. Temporary holding of a UK qualifying stablecoin, when that holding is directly connected with executing a payment, would be excluded from safeguarding requirements. The exemption is deliberately short-range: longer-term custody, such as maintaining an ongoing customer wallet, receives no equivalent payment exception and remains within the safeguarding activity perimeter.

That distinction marks a departure from what HM Treasury proposed in April. The earlier proposal said payment firms would still need safeguarding permission and suggested limiting the temporary-settlement exclusion to holding that was ancillary to other crypto activities. The September draft instead draws the line between brief payment execution and continuing custody – a structural choice that shapes how payment infrastructure firms will need to design their holding arrangements when the regime goes live.

The 2027 Start Date and What Still Has to Happen

The dealing, arranging, and financial-promotion amendments are drafted to begin on October 25, 2027, the date the FCA has set for the new crypto firm regime to commence. Amendments made through regulation 4 of the instrument would take effect after the instrument itself is formally made. Both conditions must be satisfied before any of this carries legal weight.

Parliament must still approve the draft. Beyond that, HM Treasury’s separate payments reform – a parallel legislative track – still has to define the longer-term rules governing stablecoins used in payments more broadly. The Regulations 2026 instrument resolves specific perimeter questions about dealing and safeguarding, but it does not close the larger policy question of how payment-focused stablecoins fit into the UK’s financial infrastructure over the following decade. The regulatory gap between stablecoin issuance and stablecoin use in financial arrangements is a question other jurisdictions are also managing without resolution.

What the September draft makes clear is that the UK intends to permit the payment function of qualifying stablecoins while keeping the lending and trading functions firmly inside the regulated perimeter. The harder question – whether that line is clean enough to work in practice when a single product can function as payment instrument, collateral, and yield-generating asset depending on who holds it and for how long – is one the FCA will face the moment the first firm applies for authorization under the 2027 regime.