Stablecoins are Global - Paradigm’s Response to FCA 26/13

The U.K. has spent the last several years positioning itself as a future global hub for digital assets. HM Treasury, the FCA, and the Bank of England have all repeatedly emphasized the same ambition: Build a crypto framework that protects consumers while remaining open to innovation, international capital, and globally integrated markets.

The FCA’s new consultation paper on cryptoasset perimeter guidance (CP26/13) is an important step toward operationalizing that vision. But as currently drafted, the perimeter guidance risks pulling the U.K. in the opposite direction.

1. The perimeter reaches too far abroad, and global firms will fragment rather than onshore.

CP26/13 removes the overseas persons exclusion for cryptoasset activities and expands the scope of activity considered to occur “in the U.K.” In practice, this could require global firms to duplicate trading infrastructure, operations, and legal entities locally, even when U.K. activity is only a small portion of overall volume.

This approach does not reflect how crypto markets operate, where liquidity, custody, treasury, and trading systems are typically managed through globally integrated infrastructure. Far more crypto companies seeking to operate in the U.K. will be from abroad than local, contrary to this proposal's assumptions. The current proposal is a recipe for chaos and fragmentation, breaking the promise of global crypto markets.

Forcing market-by-market fragmentation increases costs, reduces liquidity, and risks making the U.K. less competitive than jurisdictions adopting equivalence or substitute-compliance frameworks. The guidance should instead clarify that firms already regulated under comparable regimes, such as MiCA or the GENIUS Act, may rely on those governance and risk-management structures for U.K. perimeter purposes.

2. The stablecoin settlement carve-out is too narrow.

HM Treasury’s qualifying stablecoin exemption from the dealing and arranging perimeter applies only to U.K.-issued stablecoins. That excludes the overseas-issued, USD-pegged stablecoins that dominate cross-border settlement today.

That approach discourages participation in global liquidity pools and cuts against the U.K.’s broader ambition to become a hub for cross-border digital asset activity. The guidance should clarify that overseas-issued stablecoins used purely for back-end settlement, rather than marketed to U.K. retail users as investments, should not fall within “dealing” in qualifying cryptoassets.

3. “Arranging” is drafted too broadly, risking sweeping in open-source software.

CP26/13 currently treats firms providing only “part of the facilities” for a transaction as carrying on arranging activity, potentially sweeping in non-custodial wallets, interfaces, APIs, white-label front ends, and other software tools that neither hold customer assets nor control execution. This is akin to arguing that anyone who rides on a plane needs the training that pilots need for their license; it is overkill.

That interpretation goes beyond what the Treasury’s statute clearly requires and risks creating a significant chilling effect on software development in the U.K., both for crypto and broader internet-native financial infrastructure. The FCA should instead provide a clear safe harbor for non-custodial software, connectivity, and routing services that do not execute trades, exercise discretion, or custody client assets. Simply providing access to a protocol should not, by itself, constitute arranging activity.

What Comes Next

The U.K. still has a real opportunity to position itself as a gateway market for global crypto firms entering Europe. Most major crypto companies remain U.S.-incorporated, and initiatives like the U.K.-U.S. Transatlantic Taskforce for the Future of Markets could help build workable approaches to substitute compliance and mutual recognition ahead of the September authorization window.

Read our full response to the FCA here.