CP25/15: Prudential Requirements for Cryptoasset Firms

On 28 May 2025, the UK's Financial Conduct Authority (FCA) published a Consultation Paper CP25/15), seeking feedback on proposed prudential requirements for certain cryptoasset firms. This consultation is published alongside CP25/14, the FCA's consultation on stablecoin issuance and cryptoasset custody, and it is the latest milestone in the FCA's roadmap for crypto regulation in the UK. Our summary of the proposals for stablecoin issuance can be found here, and the summary for the proposals on cryptoasset custody can be found here.

This article examines the key proposals in CP25/15.

Background

• CP25/15 focuses on prudential requirements for firms carrying out the activities of issuing a qualifying stablecoin and safeguarding qualifying cryptoassets.
• Following on from this consultation, the FCA anticipates a further consultation on groups, additional services, concentration risk, the Internal Capital and Risk Assessment (ICARA) process, reporting and public disclosure of prudential information.
• The ICARA process is likely to require an internal judgement-based assessment of capital and liquid assets, in addition to the more formulaic and mechanical approach described in CP25/15 (and summarised below).
• The FCA's proposed rules will be split into two new rulebooks: COREPRU and CRYPTOPRU. COREPRU contains core rules which the FCA proposes will apply to other types of firms in the future (although at present they are confined to crypto firms). CRYPTOPRU will contain rules applicable only to crypto firms.

Key Proposals in CP25/15

The FCA's proposals are based on the MIFIDPRU requirements for MIFID firms. The key proposals relate to own funds, own funds requirements, liquid assets and concentration risk.

Own Funds - Definition and Composition of Capital:

The FCA proposes a tiered approach to capital. The tiers are:

• Common Equity Tier 1 - in essence, equity on a firm's balance sheet;
• Additional Tier 1 - in essence, contingent convertible bonds;
• Tier 2 - in essence, long-term subordinated debt.

However, capital items would need to satisfy regulatory requirements in order to qualify as own funds, and for capital instruments these requirements can be quite proscriptive.

Firms would be required to make deductions from and adjustments to own funds (e.g., for intangible assets). There are also restrictions on the amount of Additional Tier 1 capital and Tier 2 capital which may be used to satisfy a firm's capital requirement.

Own Funds Requirements

The FCA proposes a minimum capital requirement calculated in a relatively formulaic way and based on the highest of:

• A permanent minimum capital requirement - £350,000 for issuing qualifying stablecoin or £150,000 for safeguarding qualifying cryptoassets;
• A fixed overheads requirement - ¼ of the firm's relevant expenditure in the previous financial year. Relevant expenditure permits the deduction of certain expenses which are considered by the FCA to be variable (eg discretionary staff bonuses).
• A K-Factor requirement - requirement scales according to the level of certain types of activity. The FCA proposes a K-Factor for qualifying stablecoin in issuance (K-SII) and qualifying cryptoassets safeguarded (K-QCS)

Firms are also likely to be required to meet a capital requirement calculated on a more judgement-based approach - details will follow in a further FCA consultation.

Liquid Assets Requirements

The proposed minimum liquid assets requirements are as follows:

• A firm's basic liquid assets requirement (BLAR) is 1/3 of its fixed overheads requirement plus 1.6% of any client guarantees.
• A firm must meet the BLAR with "core" liquid assets, which in summary are coins and banknotes, short-term UK bank deposits, UK gilts and Treasury bonds, and units in a short-term MMF (UK or third country). But clients assets and encumbered assets are excluded.
• A non-sterling equivalent to a core liquid asset is also eligible if and to the extent that relevant expenditure (used to calculate the BLAR) is denominated in that currency.
• In addition, firms must also maintain liquid assets to cover the stablecoin issuer liquid asset requirement (ILAR), which is calibrated based on the specified price volatility of assets in the backing assets pool.
• The ILAR must be met with on-demand deposits.

Firms are also likely to be required to meet a liquidity requirement calculated on a more judgement-based approach - details will follow in a further FCA consultation.

Concentration Risk

Firms will be subject to a general obligation to monitor and control sources of concentration risk.

Next Steps

The consultation period for CP25/15 ends on 31 July 2025. The FCA will consider responses to CP25/15 and CP25/14 before publishing final rules in 2026 as part of its Crypto Roadmap.