The FCA and Bank of England are Collaborating to Create a Stablecoin and Crypto Regulation Regime

Political

Cryptocurrency

Summary:

The attempt to bring clarity and security to the cryptocurrency industry has reached a new milestone with both the UK’s FCA and the Bank of England collaborating to propose a regulatory system.

The UK’s Financial Conduct Authority (FCA) in collaboration with the Bank of England will be creating and proposing detailed regulations for stablecoins and crypto custody services.

The attempt to bring clarity and security to the cryptocurrency industry has reached a new milestone with both the UK’s FCA and the Bank of England collaborating to propose a regulatory system.

UK FCA and Bank of England present crypto regulation

In an effort to bring greater clarity and security to the crypto industry, the UK’s Financial Conduct Authority (FCA) has published detailed proposals that outline the regulations of stablecoins and crypto custody services.

The FCA is partnering closely with the Bank of England to ensure consistent oversight and stability in the United Kingdom.

Stablecoins are often considered to be a bridge between traditional finance and blockchain technology due to their ability to facilitate efficient and low-cost transactions.

Under the proposals, issuers of regulated stablecoins must use robust systems to manage backing assets. They will also be required to provide transparent information about how these assets are held and protected.

“At the FCA, we have long supported innovation that benefits consumers and markets,” David Geale, the Executive Director for Payments and Digital Finance at the FCA said. “At present, crypto is largely unregulated in the UK. We want to strike a balance in support of a sector that enables innovation and is underpinned by market integrity and trust.”

The new regulatory regime is aimed at supporting innovation in the crypto space while also ensuring the integrity of the market, consumer protection, and strength of the system.

To create the proposals, there was extensive engagement with the industry, taking feedback from previous discussion papers and roundtables into account. Before the announcement of the regulatory proposals, HM Treasury drafted legislation that was published in April 2025.

To further encourage innovation, the FCA announced that it will consider adding a specific focus on stablecoins to its innovation services in the coming months, which would create new opportunities for firms developing regulated stablecoin products.

The Bank of England, on the other hand, will oversee the stablecoins that operate at a systemic scale. Sarah Breeden, the Deputy Governor for Financial Stability at the Bank of England, welcomed the FCA’s proposals and emphasized the central bank’s intent to publish a complementary consultation paper later this year.

The paper will address the regulatory treatment of systemic stablecoins, including the possibility of allowing returns on the assets backing them.

“We continue to work closely with the FCA to ensure the integrity of the UK’s stablecoin regime,” Breeden said, “including how firms transition within the regime.”

FCA draft covers crypto custody

Other than offering clarity about stablecoins, the FCA’s consultation paper also mentions rules for crypto asset custody.

Under the proposed regulatory regime, crypto custodians must ensure that customers’ assets are effectively secured and remain accessible at all times. Enforcing this will likely involve creating specific requirements for how assets will be stored, managed, and segregated from firm assets, which would reduce the risk of loss or misuse.

The FCA’s proposals include new expectations for firms that offer either stablecoin issuance or crypto custody that will reduce the likelihood and impact of operational failures. The methods to achieve this may include governance standards, capital requirements, and measures to protect client assets in the event of a firm’s insolvency.

The public has until July 31, 2025, to provide feedback on the proposals.

Source: Cryptopolitan

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Stocks

China–U.S. Trade War

Nvidia (NVDA.O) beat sales expectations during its fiscal first quarter but forecast second-quarter revenue below market estimates on Wednesday, expecting an $8 billion hit to sales from tighter U.S. curbs on exports of its AI chips to key semiconductor market China.

Shares of the world's most valuable semiconductor firm still rose 4% in extended trading. The stock is relatively flat so far this year, compared with 2024 when the shares nearly tripled in value. Nvidia now faces trade restrictions on what it can sell, and the AI data center market is also maturing.

Washington's years-long efforts to thwart Beijing's access to top-of-the-line U.S. technology have resulted in stricter restrictions on the export of Nvidia's AI chips - stifling the company's access to one of the largest markets for semiconductors.

But Nvidia earlier this month signed a spate of new deals in the Middle East, including the first phases of a 10-square-mile data center site in the United Arab Emirates that could eventually use 5 gigawatts' worth of AI infrastructure. The company has also announced similar deals in Saudi Arabia and Taiwan.

"We have a line of sight to projects requiring tens of gigawatts of Nvidia AI infrastructure in the not-too-distant future," Nvidia Chief Financial Officer Colette Kress told analysts on a conference call.

But in the shorter term, Nvidia faces restrictions in China, where Kress said its data center revenue declined.

New U.S. restrictions on the sale of Nvidia's H20 chips to China, the only AI processors it could legally export to the country, prompted Nvidia to disclose in April that it expected a $5.5 billion charge, while CEO Jensen Huang had in May pegged the revenue impact related to the restrictions at about $15 billion.

On Wednesday, Nvidia said the actual first-quarter charge due to the H20 restrictions was $1 billion less than expected because it was able to reuse some materials. It said it lost $2.5 billion in H20 sales in the first quarter and expected to miss $8 billion in the second quarter.

However, Nvidia also said the H20 brought in $4.6 billion in sales in the first quarter and that China accounted for 12.5% of overall revenue in the first quarter.

Gil Luria, an analyst with D.A. Davidson, said the overall impact of the H20 restrictions was less than feared.

"There was a removal of some China revenue from the July quarter guides, but there was also China revenue that was pulled into the first quarter. Chinese buyers were stocking up on H20 ahead of the restrictions, which is what propped up the April quarter," Luria said.

Though major cloud companies such as Microsoft (MSFT.O) and Alphabet (GOOGL.O) have stood their ground on the billions they have earmarked this year for spending on expanding infrastructure for AI data centers, worries about such spending persist amid rapidly changing global trade policies.

On an adjusted basis, Nvidia earned 81 cents per share in the first quarter. Analyst estimates varied widely as Wall Street tried to assess the impact of restrictions on some of Nvidia's chip sales to China.

Excluding the charges, first-quarter adjusted earnings per share would have been 96 cents.

According to data compiled by LSEG, the estimate for the company's adjusted quarterly earnings was 93 cents per share, with 17 analysts providing estimates after April 15 when Nvidia said H20 shipments would require additional licenses.

The artificial intelligence market bellwether expects revenue of $45 billion, plus or minus 2%, in the second quarter, compared with analysts' average estimate of $45.90 billion, according to data compiled by LSEG.

The forecast includes a loss in H20 revenue of about $8 billion due to the recent export limitations.

"The broader concern is that trade tensions and potential tariff impacts on data center expansion could create headwinds for AI chip demand in upcoming quarters," said Emarketer analyst Jacob Bourne. "This doesn't signal an end to Nvidia's dominance, but highlights that sustaining it will require navigating an increasingly complex landscape of geopolitical, competitive, and economic challenges."

Source: Reuters

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Manuel

Cryptocurrency

After a long legal and financial battle, bankrupt crypto exchange FTX has announced that it will start distributing over $5 billion in stablecoins to its creditors starting May 30, 2025. This development marks one of the most significant steps in FTX’s bankruptcy process, offering some relief to those affected by the platform’s collapse in late 2022.

The repayments will be made in major stablecoins such as USDC and USDT, which are widely used in the crypto market for their dollar-pegged stability. These distributions come after months of courtroom proceedings, asset recovery, and financial restructuring by the estate managing FTX’s liquidation.

Stablecoin Payout Marks a Major Milestone

The planned $5 billion payout is a part of the exchange’s efforts to return customer funds lost during the fallout. According to the bankruptcy plan, this is the first phase of what could be a series of payments aimed at restoring some trust and liquidity to former FTX users and institutional creditors.

Notably, the distribution will be made in stablecoins instead of fiat currency. This approach simplifies logistics and ensures faster delivery to creditors, especially those still operating in the crypto space.

FTX’s estate has already recovered a significant portion of the assets, and this initial distribution will target creditors who have already filed validated claims. More rounds of payouts may follow as additional assets are recovered or liquidated.

What Comes Next for FTX Creditors?

While this $5 billion distribution is a major win for many affected users, the full recovery may take more time. Legal teams are still working through remaining claims, asset disputes, and international recovery efforts.

Still, the upcoming distribution signals progress in what has been a long and painful chapter for thousands of FTX users. The use of stablecoins ensures transparency and speed, allowing stakeholders to see clear value without exposure to crypto market volatility.

Source: CoinoMedia

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Economic

Forex

U.S. Federal Reserve officials at their last meeting acknowledged they could face "difficult tradeoffs" in coming months in the form of rising inflation alongside rising unemployment, an outlook buttressed by concerns about financial market volatility and Fed staff warnings of increasing recession risk, according to minutes of the May 6-7 session.

The foreboding outlook has likely shifted since then following President Donald Trump's decision just a week after the meeting to postpone the severe import tariffs, including a 145% levy on goods from China, that had forced up bond yields, driven down stock prices, and led to widening predictions of a U.S. economic downturn.

But the minutes released on Wednesday still showed Fed policymakers and staff engaged in a consequential discussion of the likely fallout from Trump administration policies that remain in flux - with even the highest tariffs on hold but not yet withdrawn altogether.

Officials at the meeting noted that volatility in bond markets in the weeks before "warranted monitoring" as a possible risk to financial stability, and noted that a change in the U.S. dollar's safe-haven status, along with rising Treasury bond yields, "could have long-lasting implications for the economy."

Fed officials continue to cite the possibility of inflation and unemployment rising in tandem as a risk that would leave them forced to decide whether to prioritize fighting inflation with tighter monetary policy or cutting interest rates to support growth and employment.

"Almost all participants commented on the risk that inflation could prove to be more persistent than expected," as the economy adapted to higher import taxes proposed by the Trump administration.

"Participants noted that the (Federal Open Market) Committee might face difficult tradeoffs if inflation proves to be more persistent while the outlooks for growth and employment weaken," the minutes said. "Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer."

RISKS TO BOTH SIDES

The prospect of rising unemployment and higher inflation was outlined in staff briefings that projected a "markedly" higher inflation rate this year due to the impact of tariffs and a job market "expected to weaken substantially" with the unemployment rate rising above estimates of full employment by the end of this year and remaining there for two years.

The unemployment rate was 4.2% as of April; Fed officials consider 4.6% to represent the level sustainable in the long run with inflation steady at the central bank's 2% target.

The delay in the most aggressive tariffs to be imposed on China and other nations caused many analysts to lower their own estimated recession risks, which Fed staff as of early May had considered "almost as likely" as their baseline outlook of slowing but continued growth.

In theory those stiff tariffs are only on hold until July pending negotiations over final tax rates, with Fed officials and business executives left in the dark about key aspects of the upcoming economic landscape.

The uncertainty still felt today was also the watchword at the meeting in early May, when the Fed decided to hold the benchmark policy rate steady in the 4.25% to 4.5% range. In a press conference after the meeting, Fed Chair Jerome Powell indicated the central bank was effectively sidelined until the Trump administration finalizes its tariff plans and the impact on the economy becomes clearer, a view reiterated by Powell and other Fed policymakers in the weeks since.

The Fed next meets on June 17-18, when the central bank will release new projections from policymakers about their outlook for inflation, employment and economic growth in coming months and years, and the projected interest rate they feel would be appropriate.

At their March meeting the median projection among policymakers was for two quarter-point interest rate cuts by the end of 2025.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Commodity

Middle East Situation

Oil climbed as the market assessed the risk of additional US sanctions on Russia and the chance that nuclear talks with Iran will fail to produce an agreement.

West Texas Intermediate rose 1.6% to settle near $62 a barrel after President Donald Trump said Russian President Vladimir Putin was “playing with fire” by escalating attacks on Ukraine. The US is weighing additional sanctions on the country after aggressive measures against Russia’s oil industry earlier this year sent crude rallying past $80 a barrel. The commodity eased off of intraday highs on news that Russia-Ukraine talks will be held in Istanbul on June 2.

Elsewhere, the New York Times reported that Israeli Prime Minister Benjamin Netanyahu is pressing on with threats to disrupt talks between Washington and Tehran by striking Iran’s nuclear facilities. A wrong turn in the negotiations stands to crimp flows from the OPEC member.

Still, bearish forces loom in the background. OPEC+ on Wednesday ratified group-wide production quotas this year and next, ahead of a decision by eight key members over the weekend on whether to bolster output again in July. Members held preliminary talks last week on making a large production hike for a third consecutive month, according to delegates.

The early conference likely stifled any remaining hope among the broader group of OPEC+ members for a slower-than-anticipated production unwind, said Robert Yawger, director of the energy futures division at Mizuho Securities USA.

“Now, the market is at the mercy of OPEC on Saturday,” he said.

The ramp-up of idled production by OPEC and its allies has stoked fears about oversupply and added to the pressure on prices. Parts of the futures curve for Brent are in contango — a bearish structure that signals ample supply.

Oil has trended lower since mid-January, with sweeping tariffs from the Trump administration and retaliatory measures from targeted countries raising concerns about an economic slowdown. However, there has been some signs recently of easing trade tensions.

Source: Bloomberg

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Cryptocurrency

Political

The US Department of Labor (DOL) formally rescinded a 2022 compliance release that discouraged fiduciaries from offering crypto investment options in 401(k) retirement plans, according to a May 28 announcement.

The decision withdraws “Compliance Assistance Release No. 2022-01,” which directed fiduciaries to exercise “extreme care” before including digital assets in retirement plan investment menus.

Neutrality restored

The Department now reverts to a neutral stance that adheres to the statutory language of the Employee Retirement Income Security Act (ERISA), which governs private-sector retirement plans.

In a statement, the Employee Benefits Security Administration acknowledged that the “extreme care” standard introduced in 2022 had no statutory basis in the law and departed from the department’s prior principles-based approach.

US Secretary of Labor Lori Chavez-DeRemer said:

“We’re rolling back this overreach and making it clear that investment decisions should be made by fiduciaries, not D.C. bureaucrats.”

While the Department’s announcement does not endorse or disapprove of crypto as retirement plan assets, it makes clear that investment discretion belongs to fiduciaries under ERISA.

The statement reiterates that fiduciaries must still comply with statutory obligations to act in the best interest of plan participants. Still, that determination must follow a consistent evaluative framework, not asset-specific cautionary directives.

Departing from ERISA precedent

On March 10, 2022, the Department released a compliance notice that warned plan fiduciaries against adding crypto investment options without heightened scrutiny.

The document flagged crypto’s volatility, custodial complexities, and regulatory uncertainty as grounds for caution, applying a threshold that critics argued exceeded the fiduciary duty standard defined under ERISA.

Historically, the Department maintained a neutral stance on specific asset classes, instead requiring fiduciaries to evaluate options based on risk, cost, and suitability in relation to plan objectives.

The 2022 release diverged from that tradition by singling out crypto as warranting special caution, despite ERISA’s requirement that fiduciaries act “with the care, skill, prudence, and diligence under the circumstances then prevailing.”

The Department’s revised guidance affirms that investment decisions must remain context-specific and grounded in a prudent review of all relevant factors.

By eliminating Compliance Release 2022-01, the Department reestablishes a uniform application of fiduciary principles under ERISA, allowing retirement plan administrators to assess crypto investment options on a case-by-case basis in line with existing legal obligations.

Source: CryptoSlate

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Central Bank

Economic

Federal Reserve officials agreed earlier this month to hold off on any interest-rate moves while they evaluated the impact of President Donald Trump's tariffs on inflation, unemployment, and the broader economy.

According to minutes from their May 6-7 meeting, released Wednesday, “almost all” of the 19 officials that participate in the Fed's meetings on policy saw a risk that "inflation could prove to be more persistent than expected.” The policymakers showed greater concerns about higher inflation than rising unemployment, the minutes showed, a key reason they left rates unchanged.

Their decision flew in the face of Trump's repeated calls to reduce borrowing costs because, in his view, there is “NO INFLATION.” The central bank, led by Chair Jerome Powell, cut its key rate three times last year to about 4.3%. Federal Reserve staff economists said during the meeting that inflation “remained elevated,” the minutes showed.

Trump's tariffs have created a dilemma for the Fed because the duties could both raise inflation — which the Fed would typically fight with higher interest rates — and slow the economy and push up unemployment, which the central bank usually tries to counter with lower rates.

Officials “judged that downside risks to employment and ... upside risks to inflation had risen, primarily reflecting the potential effects of tariff increases,” the minutes said.

Since the meeting, many officials have underscored that the Fed may have to wait for some time before making any further moves with interest rates.

Policymakers said there was “considerable uncertainty surrounding the evolution of trade policy" and its impacts on the economy, the minutes said.

“Taken together, (officials) saw the uncertainty about their economic outlooks as unusually elevated,” the minutes said.

At the same time, at least some Fed officials expressed a range of concerns that tariffs would likely raise prices in the months ahead. Many policymakers said that their surveys and discussions with business leaders suggested that companies were likely to pass at least some or all of the cost of the extra duties on to consumers. Several of the officials said that companies not affected by the tariffs could seek to raise their prices if other companies did so.

And the fact that the economy recently experienced the highest inflation in 40 years in 2022 suggested that companies might be more willing to raise prices than previously, when consumers had little experience of inflation, several officials said.