Introduction
In June 2025, the UK’s Financial Conduct Authority (FCA) published Consultation Paper CP25/14 outlining its proposed regulatory framework for fiat-backed stablecoins. This move follows the Financial Services and Markets Act 2023 (FSMA 2023), which gave the FCA new powers to supervise systemically important digital assets and payments infrastructure. The consultation focuses on issuance, redemption, custody, and asset safeguarding for stablecoin operators, and marks a significant step in the UK’s integration of cryptoassets into mainstream financial oversight.
Core Regulatory Proposals
The FCA’s consultation paper sets out concrete expectations for UK-based and overseas stablecoin firms that wish to operate in the UK. These provisions aim to protect consumers, ensure financial stability, and maintain confidence in digital financial infrastructure.
The proposed framework is principles-driven, but emphasizes auditable enforcement of backing, clear legal claims for tokenholders, and proper segregation of consumer funds.
Outlook: Aligning With a Converging Global Standard
Though CP25/14 is jurisdictionally specific, similar regulatory direction is forming across major markets:
Resources: UK (CP25/14), EU (MiCA), US (GENIUS Act)
Each framework centers around the same principles: redemption reliability, reserve backing, and access transparency.
Implications for Web3 Infrastructure
Cantina has conducted in-depth reviews across fiat-backed, overcollateralized, and algorithmic stablecoin systems. Regardless of design, several recurring security themes emerge that directly intersect with the proposed FCA rules:
- Bypassable Access Control: Role renunciation and incomplete permissioning logic allow circumvention of admin controls
- Redemption Queue Exploits: Fragmented queues and per-controller caps can introduce denial-of-service vectors
- Incomplete Blacklisting Enforcement: Transfers, burns, or bridges often miss blacklist validation paths
- Custody and Safeguarding Gaps: Rescue functions, non-standard transfer logic, and operator dependencies lack fault isolation
- Review Gaps in Vaults: Deviation from ERC standards and weak share-to-asset reconciliation impair transparency and review-readiness
These findings underscore the importance of aligning contract architecture with enforceability, traceability, and resilient control design.
Cantina’s Role in Strengthening Stablecoin Infrastructure
Cantina helps stablecoin organizations meet regulatory-grade expectations by embedding reviewability and operational trust into smart contract systems.
Key contributions include:
- Targeted assessments of permission boundaries, redemption logic, and emergency recovery paths
- Fault scenario simulation across queueing, liquidity exhaustion, and price feed instability
- Vault architecture reviews focused on reconciliation logic, rounding behavior, and share issuance edge cases
- Systematic documentation to support regulator-facing technical security reviews
Cantina’s work ensures that stablecoin ecosystems can demonstrate defensible safeguards across custody, redemptions, and systemic integrity.
How Web3SOC Aligns with Stablecoin Standards
Web3SOC evaluates organizations across four core areas: operational, financial, security, and regulatory. These categories align with the focus areas of CP25/14 by offering a structured way to assess governance, economic design, technical resilience, and compliance posture.
As stablecoin regulation advances, Web3SOC helps organizations demonstrate institutional maturity and proactively meet expectations around transparency, security, and operational discipline.
What Comes Next
The FCA’s consultation closes in October 2025, with a final regulatory framework expected in early 2026. Implementation may follow in phases, starting with UK-issued tokens and expanding to cross-border operators. Organizations should now prepare to:
- Document and audit reserve logic
- Validate redemptions and custody flows for enforcement compatibility
- Harden operator logic to resist misuse, bypasses, and ambiguity
- Track cross-jurisdictional risk where users or reserves span borders
Cantina continues to monitor evolving requirements in the UK, EU, USA, and global jurisdictions. Our reviews help organizations future-proof systems before enforcement begins.
Contact us to ensure your stablecoin system is ready for regulatory scrutiny.