Snippings

The FCA’s new stablecoin regime tries to make tokens look less like casino chips and more like regulated plumbing, especially on market conduct, while positioning the UK somewhere between MiCA’s heavy armour and the US’s fragmented patchwork, with an eye on future UK digital ID and AML infrastructures.

From my non-regulatory expert perspectives, my quick reading of the proposals threw up three interesting areas for discussion. These are the market conduct rules, the comparison with other (ie, EU and US) approaches and how all of this might intersect with (you guesssed it) digital identity.

Market conduct

The political headline in the UK is that “crypto will be regulated from October 2027,” but the quietly radical bit is that stablecoin activity is being dropped squarely into a familiar capital‑markets and conduct toolkit. HM Treasury’s Cryptoassets Regulations 2025 create new designated activities for offers, admissions and market abuse in qualifying cryptoassets, and the FCA has now layered on detailed rules.[fca.org]

First, there is a robust market integrity overlay. The Regulations set up a specific market abuse regime for cryptoassets, covering insider dealing, unlawful disclosure of inside information and market manipulation, and give the FCA the usual systems‑and‑controls powers over trading venues. The FCA’s final framework explicitly introduces “new market integrity rules covering areas such as insider trading and market manipulation” for firms supporting people to buy, trade and hold crypto. This is striking because it moves stablecoins and other qualifying cryptoassets into the same conceptual bucket as listed securities: if you run a trading platform, you are expected to police information asymmetries, suspicious patterns, and manipulative strategies rather than merely matching orders.[fca.org]

Second, the FCA is tailoring classic rule‑book concepts to the realities of crypto markets. In its press notice the FCA notes that, after consultation, it has “simplified key elements of the regime to make it more workable,” including tailoring trading rules “to better reflect how crypto markets operate.” This involves recognising continuous 24/7 trading, retail‑dominated order flow, significant offshore liquidity, and the role of proprietary trading by platforms themselves. The market abuse architecture is still recognisably FSMA‑era, but calibration choices (e.g. thresholds, reporting expectations, and what counts as “inside information” in a token environment) reflect crypto microstructure rather than being a cut‑and‑paste of the listed‑securities world.[reuters]

Third, the issuance and disclosure side is being formalised in a way that will look familiar to anyone who has lived with prospectus and admission regimes. The Regulations create designated activities for public offers of qualifying cryptoassets and admissions to trading, with requirements for disclosure documents, liability for untrue or misleading statements, and withdrawal rights for purchasers. On top of that, the FCA’s stablecoin‑specific policy work (CP25/14 and its final PS) focuses on ensuring that regulated stablecoins maintain their value through clear, transparent backing arrangements and customer information about reserve management. The intent is to force issuers into disciplined disclosure about reserves and redemption policies, while stopping short of turning them into deposit‑takers.[fca.org]

Finally, prudential conduct is explicitly framed as part of market confidence. Initially the FCA proposed that stablecoin issuers hold capital equal to 2% of the value of coins outstanding; after industry pushback, this has been reduced to 1%, with the FCA stressing proportionality and international competitiveness. That 1% buffer sits on top of full reserve backing requirements and is meant to absorb operational and market risks, including errors and delays in redemption, without requiring a banking licence. Exchanges and custodians also face “financial resilience requirements including capital and stress testing,” tying prudential resilience to their role in maintaining orderly markets. The result is a conduct‑cum‑prudential regime: behaving properly in the market is not just about not cheating your customers, but about being financially robust enough to honour redemptions and function through stress.[fca.org]

UK, EU and US Approaches

Viewed from the balcony, the UK regime is one of three major models emerging for fiat‑backed stablecoins: MiCA’s tightly harmonised EU framework, the UK’s “same risk, same outcome” extension of existing FSMA tools, and the US’s slowly coalescing mix of federal and state initiatives.[finextra]

On the EU side, the Markets in Crypto‑Assets Regulation takes a highly codified, centralised approach. MiCA creates specific categories for “asset‑referenced tokens” and “e‑money tokens,” with strong authorisation requirements, detailed white‑paper obligations, and, for “significant” tokens, additional oversight and constraints. Fiat‑denominated stablecoins that fall into the e‑money token category effectively sit close to the existing e‑money framework: issuers must be authorised, maintain segregated funds, comply with capital and governance standards, and, in some cases, face caps on usage of non‑EU currency tokens for day‑to‑day payments. The EU model emphasises pre‑approval, harmonised standards across Member States, and a clear distinction between different token types with centralised supervision, especially for large‑scale issuers.[finextra]

The UK, by contrast, is explicitly leaning on its pre‑existing FSMA toolkit and e‑money heritage. HM Treasury’s Regulations amend the Regulated Activities Order to specify new regulated activities (issuing qualifying stablecoins, safeguarding certain cryptoassets, operating trading platforms, dealing and arranging deals, staking), while also embedding crypto into a designated‑activities regime for offers, admissions and market abuse. The FCA’s rules “draw upon international best practice” but stress proportionality, simplifying capital requirements for stablecoin firms and tailoring trading rules. This “FSMA‑plus” approach allows the UK to reuse regulatory muscle memory: the same conceptual frameworks for authorisation, supervision and enforcement now apply to stablecoin firms, but with specialised technical guidance. It also allows for a dual‑track prudential split: most sterling‑denominated stablecoins fall under FCA supervision, but those considered systemic for payments purposes will be subject to a tougher Bank of England regime.[bankofengland.co]

The US picture remains more fragmented, though the direction of travel is clear. Academic and practitioner comparisons note that US proposals have leaned towards treating stablecoins either as a form of bank deposit (with federal or state banking supervision) or as a specialised form of money‑market‑fund‑like instrument, but implementation remains uneven. State money‑transmitter licences and the New York BitLicense still play an outsized role for many issuers and platforms, while federal agencies debate their respective remits; recent proposals in Congress have envisaged requiring stablecoin issuers to become insured depository institutions or operate under equivalent prudential standards, reflecting a preference for bank‑like treatment. In practice, major dollar stablecoins operate through a blend of state oversight, bank partnerships and bespoke arrangements with federal regulators, with few truly harmonised federal statutory rules yet in force.[papers.ssrn]

A useful way to read these differences is through the “same risk, same regulatory outcome” lens that scholars have used to frame stablecoin regulation. The EU model says, in effect, that if it looks like e‑money and walks like e‑money, it should live in a bespoke, harmonised token‑specific regime bolted onto the single market. The UK says that where stablecoin activities pose similar risks to already regulated activities, those activities can be brought into FSMA, with amended rules to achieve equivalent outcomes, rather than creating a wholly separate code. The US, still in motion, seems to gravitate towards treating stablecoins as some combination of bank deposits and money‑market instruments, placing emphasis on federal safety‑and‑soundness oversight even if the statutory architecture is incomplete.[fca.org]

From a competition and location‑choice perspective, the UK’s decision to cut the capital buffer from 2% to 1% and to stress “proportionate” rules is clearly aimed at making London an attractive primary home for issuers, without sacrificing basic prudential credibility. But there is a trade‑off: MiCA’s fully harmonised framework may appeal to issuers targeting the EU retail market, particularly euro‑denominated tokens, while the gravitational pull of the dollar and US capital markets means that major dollar stablecoin issuers will remain deeply entangled with US regulation regardless. The UK is betting that a well‑understood, FSMA‑based regime, with clear paths to systemic oversight for large schemes, will be enough to secure a meaningful slice of the stablecoin infrastructure stack – especially for sterling and multi‑currency issuers whose business models depend on regulatory clarity rather than retail hype.[reuters]

Digital identity

While the FCA’s stablecoin rules focus on prudential and market‑conduct questions, they sit on top of – and will eventually intersect with – broader UK and international moves on digital identity and AML. The same regulatory architecture that brings stablecoin issuance and custody into scope also amends the Money Laundering Regulations and Payment Services Regulations, signalling that crypto AML controls are expected to be integrated with existing financial‑crime and KYC infrastructures rather than treated as a sideshow.[fca.org]

One axis of integration is the travel rule and VASP supervision. The FCA already supervises crypto firms for anti‑money‑laundering purposes, and until the full regime takes effect “crypto is largely unregulated except for financial promotions and financial crime purposes.” Under the new regime, firms issuing stablecoins, operating trading platforms, safeguarding assets or arranging deals will be authorised and supervised entities, expected to implement robust customer due diligence, transaction monitoring and travel‑rule compliance for qualifying cryptoassets. This anchors stablecoin flows squarely within existing AML architectures: customer identity, transaction data and risk scoring become linked for on‑chain and off‑chain activity in ways that regulators can audit.[fca.org]

The second axis is the emerging digital ID ecosystem. While the FCA’s policy materials do not yet tie stablecoins explicitly to a particular digital ID framework, the UK’s broader policy agenda includes developing digital identity trust frameworks and industry‑led schemes to enable interoperable, verifiable credentials for individuals and businesses. In parallel, the EU’s eIDAS 2.0 and European Digital Identity Wallets are pushing towards standardised, cross‑border digital ID credentials that can be used in financial services onboarding and strong customer authentication. It is not difficult to imagine a near‑future convergence where UK‑regulated stablecoin wallets must (or at least can) rely on such digital IDs as part of their KYC and SCA processes.[regulationtomorrow]

This leads to the idea of “identity‑bound” stablecoins. One plausible design pattern is that certain classes of stablecoin, particularly those intended for retail payments or systemic use, may be legally required to circulate only among addresses controlled by identified customers onboarded under KYC standards, even if the underlying ledger is public. In that world, a UK‑authorised stablecoin issuer’s liability is not just to redeem tokens at par, but to ensure that tokens are held and transferred within a perimeter of verified, risk‑profiled counterparties. The identity binding might be achieved through:[fca.org]

Wallets that only allow transfers to other whitelisted, KYC’d addresses, enforced by smart‑contract‑level logic.
Integration of verifiable credentials (e.g. proofs of KYC, residency, sanctions‑screening) into wallet software, with issuers and VASPs relying on those credentials to satisfy regulatory obligations.
Strong customer authentication flows that rely on digital IDs for high‑risk or high‑value transactions, aligning stablecoin usage with PSD2‑style SCA expectations.[fca.org]

Of course, this collides with privacy and civil liberties concerns. One of the attractions of early stablecoins was their cash‑like, bearer‑style transferability; a regime of identity‑bound wallets risks creating a highly surveilled, permissioned environment in which every token movement is linked to a verified identity. The UK’s approach, leveraging FSMA and existing AML law, implicitly prioritises traceability and accountability over anonymity, but it still leaves design space for privacy‑preserving techniques – for example, pseudonymous on‑chain addresses backed by off‑chain verified identities, with regulated gateways enforcing KYC and travel‑rule compliance.[regulationtomorrow]

The interaction between digital ID and stablecoins will also shape the boundary between retail and wholesale, and between domestic and cross‑border usage. For domestic retail payments, the combination of UK‑authorised stablecoin issuers, FCA‑supervised VASPs and digital ID trust frameworks could yield a tightly regulated, high‑assurance environment in which stablecoin payments are functionally similar to card or account‑to‑account payments from an AML and SCA perspective. For cross‑border flows, however, the picture is messier: interoperability with foreign ID schemes, uneven adoption of travel‑rule standards, and differing attitudes to privacy will all complicate any attempt to make UK‑regulated stablecoins both globally usable and fully compliant.[fca.org]

The deeper question, which the FCA’s rules only partly answer, is whether the UK wants stablecoins to be more like “digital notes and coins with APIs” or more like highly constrained, identity‑bound instruments akin to tokenised bank deposits. A regime that leans heavily on digital identity and AML infrastructure will likely produce stablecoins that are safe, boring and fully embedded into the regulated financial system – which may be the point. But it will also leave a gap between regulated, identity‑bound tokens and unregulated, freer‑flowing cryptoassets, a gap that organised crime and regulatory arbitrageurs will be happy to exploit if the incentives and architectures are not carefully aligned.[fca.org]

xxx

Shopify’s Q1 data shows AI usage is changing the funnel of commerce incredibly quickly (covered previously on brainfood here)
AI-driven traffic to Shopify stores grew 8x year on year. Orders from AI-powered searches grew almost 13x.
Vanessa Lee, Shopify’s VP of Product, says AI commerce is growing nine times faster than social did at the equivalent point in its maturity, and three times faster than mobile.
AI-referred sessions convert 49% better than organic search, win in 23 of 25 categories, and carry orders 14% larger.
Adobe sees the same shape across its network. AI traffic to retail up 138% in May, converting 54% better than non-AI sources.
These customers are showing up much later in the funnel with higher intent. And, of course they are, they did all of their consideration in the chatbot. 55% of AI-referred sessions start on a product page. From organic search, that number is 20%. The customer also arrives anonymous. OpenAI shares nothing about the conversation that produced the visit, so you get a high-converting stranger and no idea what convinced them.
For now, the trade is spectacular for brands.
MoffettNathanson’s Michael Morton tracked where AI platforms send commerce traffic and found a brand’s.com page was outpacing the larger commerce marketplaces by 4-8x. In the Google search era, that ratio was roughly 2x. AI is giving the brands higher-intent customers, direct to your own site, and nobody charging for the click (well, not yet anyway).

From: 🧠 Finance Agents & the Optimization Economy | Brainfood.

xxx

Snippings

Burnham scraps new digital ID scheme

Anti-graft prosecutor accused of corruption as Indonesia turf war escalates

DRAFT Stablecoins and Stability

Market conduct

UK, EU and US Approaches

Digital identity

Trump Media to sell high-speed access to president’s social media posts

🧠 Finance Agents & the Optimization Economy | Brainfood

Visa launches stablecoin platform

UC Berkeley professor: ‘Things are getting weird’, even Mitch McConnell photos aren’t being trusted

Visa debuts AI financial advice feature | American Banker

Russia, Iran, North Korea moved $104 billion in crypto to bypass sanctions – India Today

I want to write a short article about financial literacy. Using the UK as the…