What the new FCA and Bank of England rules mean for Circle and Tether

Key takeaways

• The UK is on track to finalize new regulations for stablecoins in 2026.

• The new rules will not affect access to USDT or USDC on crypto exchanges.

• However, they will affect Circle and Tether’s ability to expand to more common use cases in the country.

As the government and financial authorities propose new rules for the sector, in 2026 stablecoins are set to fall under the umbrella of UK regulation for the first time.

But what implications does the growing scope of regulation have for issuers like Circle and Tether?

The UK’s emerging regulatory framework consists of two elements: the Bank of England’s proposed regime for systemic stablecoins and new legislation establishing crypto services as regulated financial activities.

However, neither is expected to have a major impact on the use of stablecoins for crypto trading and decentralized finance.

An amendment to the Financial Services and Markets Act (FSMA) of 2000 raises the regulatory bar for exchanges, making it risky to list low-quality tokens.

However, the legislation does not impose specific rules on registration. Ultimately, it will be up to the platforms to determine how best to protect users.

Given their popularity and track record of stability, large centralized stablecoins like USDT and USDC are unlikely to disappear.

The new law was not designed to prohibit cryptocurrency trading.

On the other hand, issuers wishing to integrate stablecoins into the UK’s traditional financial sector will need to improve their compliance.

The FSMA amendment distinguishes between activities that take place in the UK or outside the UK.

For example, Tether will still be able to issue USDT to UK companies through its offshore entities.

But if it wants to join the GBP rails or manage reserve assets from the UK, it will need to register with the Financial Conduct Authority.

Likewise, the regime proposed by the Bank of England has little to say about the stablecoin market as it exists today.

Rather, it is a forward-looking framework designed with large-scale adoption of stablecoin payments in mind.

Central bank rules anticipate a hypothetical stable currency currently denominated in GBP and of systemic importance.

If, or when, a stablecoin meeting this threshold emerges, strict custody and reserve rules will come into effect, requiring additional oversight from issuers.

While crypto and DeFi have fueled the stablecoin boom thus far, issuers are increasingly recognizing that more mainstream, payments-focused use cases will drive the next phase of adoption.

For Circle and Tether, the key question in a more closely watched UK market is whether either issuer wants to move into the country’s banking and payments scope.

Circle already presents itself as compliant and is registered with the FCA as an e-money institution.

This positions it well to gain authorization to issue stablecoins if it desires deeper integration with GBP rails, regulated custody partners and institutional payment flows.

Meanwhile, the most natural path for Tether would be to stay offshore.

But this approach will limit USDT to existing use cases or require the intermediation of regulated entities in the UK for payments integration.

Additionally, Tether’s existing model runs counter to the general direction of the UK, where stricter rules, clearer accountability, and reserve asset requirements are set to define future adoption.

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