UNITED KINGDOM Law and Practice Contributed by: James Burnie, Kathryn Dodds, Olga Antonova and Nicky Androsov, gunnercooke llp
11. Open Banking 11.1 Regulation of Open Banking
in the UK’s roadmap for crypto regulation, comple - menting HM Treasury’s draft legislation and aligning with the Bank of England’s forthcoming systemic sta - blecoin regime. For issuers, the FCA proposes stringent requirements around reserve management. Stablecoins must be ful - ly backed by low‑risk, liquid assets such as short‑term government debt or on‑demand bank deposits. These reserves must be held in trust for the benefit of coin holders, segregated from the issuer’s own funds, and reconciled daily to ensure 1:1 parity with the reference currency. Importantly, issuers cannot pass on interest earned from reserve assets to stablecoin holders, rein - forcing the stablecoin’s role as a payment instrument rather than an investment product. Consumers must also have an unconditional right to redeem their hold - ings at par value, ensuring confidence in the instru - ment’s stability. On custody, CP25/14 outlines a framework for safe - guarding qualifying crypto-assets, drawing inspiration from the FCA’s existing CASS rules but adapted to the unique nature of digital assets. Custodians must segregate client assets from their own, either through individually segregated or omnibus wallets, and hold them on trust for clients. The FCA also addresses the reuse of client assets, noting that crypto markets often involve vertically integrated firms offering ser - vices such as staking or lending alongside custody. The consultation seeks to balance innovation with consumer protection, ensuring that clients’ rights are preserved and assets can be returned swiftly in the event of insolvency. Finally, the FCA emphasises that these proposals are part of a broader effort to create a safe, competi - tive, and sustainable crypto-asset sector in the UK. The consultation runs until July 2025, with feedback informing final rules expected in 2026. The regime will affect a wide range of stakeholders, including stable - coin issuers, custodians, payment service provid - ers, auditors, and consumer groups. By embedding prudential safeguards, disclosure requirements, and operational resilience standards, CP25/14 aims to provide clarity for firms while protecting consumers, positioning the UK as a leading jurisdiction for regu - lated crypto innovation.
Whilst the United Kingdom is outside of the EU, the Payment Services Directive (PSD2) has been imple - mented in the UK. UK banks have been instructed to support open banking, and this has led to a plethora of new payment service firms operating in the UK. In this respect, it is worth noting that in the wake of PSD2 there has been a focus on attracting new account information service providers (AISPs), payment initia - tion service providers (PISPs) and card-based pay - ment instrument issuers (CBPIIs) to the UK. 11.2 Concerns Raised by Open Banking There are clear rules and requirements governing the protection of data privacy and data security in the UK, and these are complied with by participants in the ecosystem. This has facilitated banks and technology providers in enabling open banking, as they are clear as to their obligations. The concept of fraud is broader than just financial ser - vices and fintech, and is a general offence in the UK. The Fraud Act 2006 sets out the definition of fraud and defines it broadly in terms of the following. • Fraud by False Representation: A person commits this offence if he or she: (a) dishonestly makes a false representation; and (b) intends, by making the representation to make a gain for himself/herself or another, or to cause loss to another or to expose another to a risk of loss. • Fraud by Failing to Disclose Information: A person commits this offence if he or she: (a) dishonestly fails to disclose to another person information which he or she is under a legal duty to disclose; and (b) intends, by failing to disclose the information to make a gain for himself/herself or another, or to cause loss to another or to expose another to a risk of loss. 12. Fraud 12.1 Elements of Fraud
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