The United Kingdom Financial Conduct Authority (FCA) announced on February 25 that four companies have been selected to participate in its Regulatory Sandbox program to test how their stablecoin services interact with proposed regulations in a safe environment.
The FCA received 20 applications from firms wishing to test stablecoins in the sandbox, with the chosen four being Monee Financial Technologies, ReStabilise, Revolut, and VVTX.
The sandbox allows firms to trial stablecoin products in real-world conditions with appropriate safeguards, helping the FCA assess its proposed stablecoin policy in a live environment and ensuring future rules are “clear, effective and support responsible innovation.”
The FCA said its testing, which will begin in Q1 2026, will primarily focus on stablecoin issuance, with the four selected firms’ proposals representing “a range of stablecoin use cases,” including payments, wholesale settlement and digital asset trading.
The regulator added that “each firm intends to issue U.K. stablecoins under the future regulatory regime.”
“We are supporting U.K. stablecoin issuers to ensure they can be trusted for payments, settlement and trading,” said Matthew Long, director of payments and digital assets at the FCA. “It will benefit consumers and financial transactions and help to deliver the FCA’s strategy and the Government’s National Payments Vision.”
According to the FCA, stablecoin testing is part of its broader work to enable innovation across U.K. financial services. It complements other innovation initiatives, such as the Digital Securities Sandbox (DSS), which modifies U.K. regulations to enable financial market participants to use new technologies—such as Distributed Ledger Technology (DLT)—in the trading and settlement of digital securities, such as shares and bonds.
Throughout both sandboxes, participant firms will receive feedback from FCA specialists while helping to shape the U.K.’s future regulatory approach.
Regulatory proposals
On May 28, 2025, the FCA published two consultation papers, one on “stablecoin issuance and cryptoasset custody,” and the other on “a prudential regime for cryptoasset firms.”
In terms of the former, the regulator laid out its plans to ensure regulated stablecoins maintain their value and that customers are provided with clear information on how the backing assets are managed, while bringing issuers and custodians into the U.K.’s financial services authorization regime.
Specific proposals included that stablecoin issuers appoint independent third-party custodians to hold reserve assets; a minimum on-demand deposit requirement of 5%; a ban on issuers paying holders interest; requiring issuers to keep assets segregated in a statutory trust; a mandate that any stablecoin holder can request direct redemption of any amount, to be actioned by the end of the following working day; and a permanent minimum capital requirement for issuers of qualifying stablecoins, to be set at £350,000 (around $471,500).
The FCA is currently considering feedback on the consultation and said it aims to publish the final rules sometime this year, with the regulation to come into force in 2027.
However, the FCA is still awaiting legislation that would officially grant it rulemaking authority over the digital asset sector. The legislation is expected to pass this year, but as things stand, it is still in draft form and without any clear indication of when it will be enacted into law.
Another unknown is an inquiry into stablecoins currently underway in the House of Lords—the U.K.’s upper house of parliament—one of the goals of which is to gather expert feedback on how stablecoins should be regulated.
Thus, it is possible that the FCA’s final stablecoin rules may still be influenced by the results of this inquest.
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Stablecoin inquiry
At the end of January, the House of Lords Financial Services Regulation Committee, a Lords select committee appointed to consider financial services regulation, launched an inquiry into stablecoins, calling for evidence on their growth, proposed regulation, and issues around sterling-denominated tokens.
The Baroness Noakes DBE, Chair of the Financial Services Regulation Committee, said at the time: “We have launched this inquiry to assess the opportunities and risks that the growth of stablecoins may present for the U.K. financial services sector and the wider economy, and whether the Bank of England and FCA’s proposed regulatory frameworks provide measured and proportionate responses to these developments.”
It held its first hearing on February 4, receiving evidence from two fairly skeptical expert witnesses—Chris Giles, economics commentator at the Financial Times, and Professor Arthur Wilmarth, Jr., Professor Emeritus of Law at George Washington University Law School—who gave largely unfavorable feedback on topics such as safety, regulation, and whether stablecoins are the future of money.
The second hearing, held on February 11, was less painful listening for stablecoin advocates, as the two specialists—Simon Gleeson, law Professor at the University of Oxford and a leading expert in financial services and banking regulation, and Dr. Kern Alexander, Professor of International Banking and Financial Law at the University of Zurich—spoke broadly in favor of stablecoins.
They particularly hailed the utility of stablecoins for settling cross-border payments and providing competition to the leading payment providers, Visa (NASDAQ: V) and MasterCard (NASDAQ: MA).
Further hearings are scheduled, with the committee setting a deadline of March 11, 2026, for the submission of written evidence.
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Source: https://coingeek.com/uk-fca-picks-4-firms-to-test-stablecoin-innovation-in-its-sandbox/
