Potential Conflict Between Rachel Reeves and Andrew Bailey Threatens Britain's Aspiration for Stablecoins
UK Advancing Stablecoin Regulatory Framework, Balancing Caution and Ambition
The United Kingdom is making strides in establishing a robust regulatory framework for stablecoins, a digital currency pegged to a stable asset like the US dollar, which has seen significant growth in recent years.
The Financial Conduct Authority (FCA) published consultation papers in mid-2025, proposing comprehensive rules for stablecoin issuance and cryptoasset custody. These proposals require stablecoin issuers to fully back tokens 1:1 with secure, liquid assets held in statutory trusts, ensuring consumer protection and market stability.
However, the UK’s regulatory timeline lags behind major jurisdictions such as the EU and US. The EU’s Markets in Crypto-Assets Regulation (MiCA) has been fully applicable since December 2024, while the US passed the GENIUS Act in July 2025. This delay has created market uncertainty, with some startups reducing activities or leaving the UK market.
The Bank of England's stance towards stablecoins and cryptoassets in general is cautious, seeking robust regulation before wider adoption. Crypto executives and industry leaders have urged the UK government, including the Bank of England, to adopt a national stablecoin strategy that recognizes stablecoins as essential digital payment rails and financial infrastructure.
Industry voices advocate for regulatory clarity to support Britain’s ambition to be a global hub in digital finance. Clear rules could bolster the UK’s role in digital assets and enable stablecoins to contribute significantly to its financial ecosystem.
The BCG analysis found stablecoin transaction volumes topped $26.1tn in 2024. Global payments giants Visa and Mastercard have partnered with established stablecoin issuers to integrate the new technology into their systems. The US's JP Morgan has launched its own private blockchain platform "JPM Coin" for institutional clients.
Despite the progress, the UK needs to move with "relentless" speed in "policy or regulatory changes" to capture a slice of the stablecoin wave. The UK Fintech industry body UK Finance has urged the Bank of England to "publicly walk back" from its proposals and end its "bias towards incumbents and legacy systems."
In summary:
- The UK is progressing towards a solid regulatory framework for stablecoins but must balance regulatory caution with timely implementation and strategic clarity.
- The UK’s delay in implementing stablecoin regulations compared to the EU and US creates market uncertainty but offers the opportunity to design a more flexible framework tailored to attract global stablecoin issuers.
- The Bank of England's cautious stance towards stablecoins and cryptoassets in general requires a national stablecoin strategy that recognizes stablecoins as integral financial infrastructure.
- Regulatory clarity is crucial for Britain’s ambition to be a global hub in digital finance, bolstering the UK’s role in digital assets and enabling stablecoins to contribute significantly to its financial ecosystem.
[1] FCA Consultation Papers: CP25/14 and CP25/15 [2] BCG Analysis: Stablecoin Transaction Volumes Top $26.1tn in 2024 [3] UK Finance: Publicly Walk Back from Proposals and End Bias towards Incumbents [4] Kunal Jhanji, Partner at Boston Consulting Group: Alignment across Stakeholders for Stablecoin Regulation [5] Chancellor's 2025 Mansion House Speech: Plans to Drive Forward Developments in Blockchain Technology, Including Stablecoins
- To strike a balance between caution and ambition, the UK needs to expedite the implementation of its regulatory framework for stablecoins, as suggested in FCA Consultation Papers CP25/14 and CP25/15.
- The UK's delay in stabilizing its stablecoin regulations contrasts with the EU and US, producing market uncertainty but offering an opportunity to establish a more adaptable framework attractive to global stablecoin issuers.
- The Bank of England's cautious stance on stablecoins and cryptoassets necessitates a national stablecoin strategy that acknowledges stablecoins as essential elements of financial infrastructure, as proposed by industry leaders like Kunal Jhanji, Partner at Boston Consulting Group.
- For Britain to assert itself as a global front-runner in digital finance, it must attain regulatory clarity to encourage the growth of stablecoins within its financial ecosystem, as underscored in the Chancellor's 2025 Mansion House Speech.
