UK Stablecoin Rules and Indian Payment Startups: Issuance, Custody and Partnerships

Stablecoins are central to cross-border payments, and Indian payment startups are looking at them for remittance, treasury and settlement. The UK has now set out a regime for stablecoins that covers who may issue them, what must back them and how holders can redeem. It will matter to any Indian fintech that wants to issue a stablecoin to UK users, hold stablecoins for them, or build a payment service on a partner’s coin.

This guide explains the split between the FCA and the Bank of England, the rules on issuance, backing and redemption, custody, the options for Indian startups, and the Indian-law constraints that sit alongside. It summarises secondary reports of the FCA’s final rules: UK regulatory points must be confirmed with UK advisers, and Indian law on stablecoins, which is unsettled, should be confirmed with an Indian lawyer.

Two regulators, two tiers

The FCA published final rules for stablecoin issuance on 30 June 2026 in policy statement PS26/10, as part of the wider cryptoasset package. Commentary says the FCA will regulate issuers of qualifying stablecoins in the UK, and that a separate Bank of England regime applies to systemic stablecoins, which are coins widely used as a means of payment (Pinsent Masons; PwC; Addleshaw Goddard).

For systemic coins, the Bank of England consulted on its approach and the consultation closed on 22 September 2026. Reports say the Bank would lead on prudential supervision once HM Treasury recognises an issuer as systemic. For most startups, the starting point is the FCA regime, because few new issuers will be systemic.

The wider regime starts on 25 October 2027, with an application window that runs from 30 September 2026 to 28 February 2027. Firms that apply in the window are expected to be treated more favourably than firms that wait, so a startup that is considering issuance should decide early.

Issuance, backing and redemption

The central protections in any stablecoin regime are about backing and redemption. Commentary on PS26/10 says issuers must hold backing assets of appropriate quality, kept separate from the issuer’s own assets, and holders must be able to redeem at par within a stated period. Reported rules also cover disclosure to holders and the way backing assets are held and reported.

Capital requirements are set by reference to size. Reports of the final rules mention a floor for non-systemic issuers, with one source giving the figure as 1% of backing assets. Because the secondary sources differ in detail, we do not rely on this figure, and the policy statement should be read for the exact thresholds and calculation method.

The practical meaning is that issuing a stablecoin is a regulated, capital-intensive business with ongoing reserve and reporting duties. A startup that wants only to use stablecoins in a payment flow is in a different position from one that wants to be the issuer, and the difference should be clear in the business plan.

Redemption is the feature to test. A stablecoin that cannot be redeemed quickly at par is not stable in practice, whatever its marketing says. Questions to ask any issuer, including yourself, are: who may redeem, at what cost, within what time, from which assets and what happens during a run. Reserve composition matters too. Holding backing assets in short-dated government securities or bank deposits carries different risks, and the rules are intended to restrict riskier assets.

For a payment startup, the commercial question is often whether to build or buy. Issuing gives control over margin and product but requires capital and approvals. Using an existing coin avoids that but exposes you to the issuer’s decisions, including fees, freezes and regulatory events. Contract for step-in rights, notice periods and a plan for moving to another coin if the partner fails or is restricted.

Custody and holding for customers

Safeguarding rules in the same package apply to firms that hold cryptoassets, including stablecoins, for customers. Commentary describes requirements to keep customer assets separate, to reconcile records, to hold them in a way that protects customers if the firm fails and to have governance and controls around keys. A payment startup that holds stablecoins for UK customers in a wallet, even temporarily as part of a transfer, should analyse whether it is safeguarding.

Overseas reach follows the pattern covered earlier in this series. The overseas persons exclusion is not extended to crypto, and activity involving UK consumers can be treated as carried on in the UK, so an Indian business that holds stablecoins for UK users may be caught wherever its servers are.

Payments law may also apply. Using stablecoins as part of a money transfer chain can bring in payment services rules, e-money rules and anti-money laundering duties, depending on how funds move and who the customer is. Do not assume that a service becomes unregulated because the settlement leg uses a token.

Options for Indian payment startups

There are broadly four routes. First, issue your own coin: the heaviest option, with authorisation, capital, reserves and redemption duties. Second, partner with a regulated issuer and use its coin: lighter, but you must check what activities you perform for customers, and who carries the regulatory risk. Third, use stablecoins only in business-to-business settlement, where the lower-risk analysis for institutional flows may apply, provided that UK consumers are not passed through. Fourth, stay out of UK retail and serve UK customers through an authorised partner.

Partnerships need careful contracts. Define which party is the issuer, custodian and distributor, who holds the customer relationship, who answers regulatory questions and who bears loss if the coin depegs or the partner fails. Ask for evidence of the partner’s authorisation or application, reserve attestations and incident procedures.

Choose the route against your actual market. If your UK volume is small, a partnership is usually cheaper than authorisation. If UK consumers are the core of the business, a UK entity and an application may be the logical path, with the Indian entity as a technology and operations arm under proper intra-group agreements.

Whatever route you choose, treat compliance as a product feature. UK partners, banks and card networks will ask for policies on sanctions, travel rule data, transaction monitoring and complaint handling before they integrate. Building these once, to a UK standard, usually makes entry into other markets easier, including the UAE and Singapore, where stablecoin rules are also developing.

Indian-law limits, remedies and quick answers

India has no dedicated stablecoin law. Virtual digital assets are taxed, with a 30% tax on gains and a 1% TDS on transfers, and entities dealing in them must register with FIU-IND and follow anti-money laundering rules. The Reserve Bank of India has expressed caution about stablecoins, and policymakers have discussed the issue publicly, but we did not find a settled rule permitting an Indian company to issue a rupee or dollar stablecoin. Cross-border use also engages FEMA: remittances and overseas investments must follow the Liberalised Remittance Scheme or the rules for overseas direct investment, and an Indian company funding a UK subsidiary must report it. Before going further, get a written opinion on whether your proposed flow is permitted in India. If a UK partner or regulator raises a concern, respond promptly and in writing. If you have already served UK users without a plan, stop onboarding new UK consumers while you take advice, keep records and consider whether the application window is still open to you. A cautious, documented approach is much easier to defend than a rushed one.

Finally, plan for exit and failure. Stablecoin businesses can be disrupted by a partner outage, a depeg, a banking change or a regulatory decision. A documented continuity plan, covering customer communication, redemption routes and data export, is expected of regulated firms and is sensible for anyone building on a partner’s coin.

Related reading: FCA crypto authorisation: what Indian firms must do, UK staking regulation for Indian providers, how the UK crypto regime reaches Indian Web3 startups, stablecoins in India: USDT and the ARC token, the RBI leaning towards prohibition, UK crypto exchanges serving Indian users and FIU-IND and crypto tax in India vs the UK; also the FCA DeFi consultation for Indian protocol developers; also the GENIUS Act and stablecoins from 18 January 2027 and the CLARITY Act status after the Senate vote.

Quick answers

Does the UK regulate stablecoins?

Yes. The FCA’s final rules published on 30 June 2026 cover issuance of qualifying stablecoins, and a Bank of England regime applies to systemic stablecoins. The wider regime starts on 25 October 2027.

Can an Indian payment startup issue a stablecoin to UK users?

Only with appropriate UK authorisation, and Indian law on stablecoins is unsettled, so UK and Indian advice are both needed before planning an issuance.

Is using a partner’s stablecoin simpler than issuing our own?

Usually yes, but you must still analyse what you do for customers, such as custody or arranging transfers, and allocate regulatory responsibility clearly in the contract.

Can an Indian company issue a stablecoin?

We found no settled Indian rule permitting an Indian company to issue a rupee or dollar stablecoin, and the RBI has expressed caution. Get a written opinion on your proposed flow before planning an issuance.

Do stablecoin holdings for UK users need safeguarding?

The FCA’s package applies safeguarding rules to firms that hold cryptoassets, including stablecoins, for customers. A startup that holds stablecoins for UK customers, even briefly, should analyse whether it is safeguarding.

Final word

Halverton & Co. is an Indian law firm advising UK companies, founders, investors and law firms on Indian law, including FEMA, FIU-IND and Indian-law structuring for Indian fintech and payment startups expanding abroad. We practise in Jharkhand, Maharashtra and before the Supreme Court of India, and work alongside your UK solicitors, who advise on English law. Halverton & Co.: Where tech needs law! If you have a question about Indian law, write to us at office@halvertonandco.com, or get in touch.

This article reflects developments reported up to late October 2026. It is for general information only, is not legal advice, and does not create a solicitor-client relationship. Halverton & Co. is an Indian law firm, is not authorised or regulated by the Solicitors Regulation Authority, and does not advise on English law; UK-law points should be confirmed with UK advisers.