The UK Government wants Britain to be a global hub for digital assets. A goal the Chancellor, Rachel Reeves, placed firmly at the centre of her recent Mansion House speech. But when it comes to stablecoins – one of the most practical and fast-growing components
of the digital asset economy - the UK is moving too slowly and potentially in the wrong direction.
Simply put, the UK lacks a coherent, long-term vision for digital money. While we debate, others are just getting on with it. The United States advanced bipartisan legislation that treats stablecoins not as speculative novelties, but as core infrastructure
for modern payments and capital markets. The EU has already implemented MiCA, giving stablecoin issuers regulatory certainty across all 27 member states. Singapore has issued detailed guidance and begun licensing major players. Dubai has gone further still,
establishing a dedicated virtual asset regulator with a clear, innovation-friendly rulebook. These countries are not just regulating - they’re competing for leadership. And they’re doing it at pace.
The UK, by contrast, is drifting towards a fragmented and restrictive approach that risks deterring innovation, limiting adoption, and pushing activity overseas.
Stablecoins are not a niche experiment - they are becoming a pillar of the digital economy. US Treasury Secretary Scott Bessent believes the stablecoin supply could reach $2 trillion by 2028. So why do some UK regulators and officials increasingly view them
as a threat to be contained rather than a tool to be embraced?
There are several areas of concern.
First, Bank of England warnings about the use of stablecoins in wholesale markets are short-sighted. Stablecoins are the most widely used on-chain digital settlement instruments. Barring their use in wholesale finance could lock the UK out of the next wave
of capital markets innovation - including tokenised securities, real-time settlement, and programmable money.
Second, the proposed division between “systemic” and “non-systemic” stablecoins - with oversight split between the Bank and the Financial Conduct Authority (FCA) - risks creating a regulatory cliff-edge. If a stablecoin succeeds and grows,
its issuer could be forced to radically overhaul its business model just to stay compliant. That disincentivises scale, deters investment, and raises barriers for new entrants. What’s needed is a coherent, proportionate framework that allows innovation to
grow responsibly.
Third, the proposed regime places stablecoins at a clear disadvantage compared to other forms of digital money. Capital requirements are more stringent than those for e-money, yet stablecoin issuers are denied the benefits granted to tokenised bank deposits
- such as access to central bank liquidity facilities or the ability to offer interest. If stablecoins are to provide consumers with a viable, innovative alternative, they must be allowed to compete on a level playing field. Instead, the UK risks squandering
its chance to lead in the future of financial infrastructure by treating stablecoins as a regulatory afterthought.
In short, the UK Cryptoasset Business Council (UKCBC) is urgently calling for a regulatory regime that avoids bifurcation and cliff-edge effects, facilitates the use of stablecoins for wholesale settlement, ensures a level playing field, and provides legal
recognition for stablecoins as a form of money.
Led by a Blockchain Tzar and as part of a wider ‘Government Blockchain Action Plan’, it is vital that we implement a coherent National Digital Money Strategy - one that places GBP-backed stablecoins at its core. Current thinking treats stablecoins narrowly
as a financial stability risk, rather than recognising their strategic potential within a modern, globally competitive monetary system.
A well-designed, well-regulated GBP stablecoin would serve as a powerful tool for payment innovation, financial inclusion, and ensure the UK remains relevant in the next generation of digital finance. Importantly, it would offer international markets access
to sterling as a programmable, globally accessible digital currency - broadening the distribution of UK-denominated assets and creating diversified demand for government debt. In a world where dollar-backed stablecoins dominate, the UK has a unique opportunity
to establish the pound as a credible alternative. The mechanics of international adoption rely on trusted governance, rule of law, and deep capital markets - all of which the UK has in spades.
But without a thought-out endgame strategy, current proposals risk being piecemeal and reactive, failing to align regulatory frameworks with national economic objectives. We need to start with a clear vision of where we want to end up - and only then design
the path to get there. Right now, there’s little evidence that the UK has articulated a long-term strategic objective for digital money. The conversation is dominated by risk management and containment, but the endgame is missing. Stablecoins must be viewed
not merely as a threat to mitigate, but as a strategic asset - one that can enhance UK competitiveness and strengthen financial resilience and expand the country’s global influence in a digital-first economy.
None of this is an argument against regulation. On the contrary, the UKCBC supports strong, clear rules that protect consumers, uphold stability, and encourage long-term growth. But those rules must be designed for the future - not inherited from the past.
They must be proportionate, flexible, and internationally aligned.
The jurisdictions that act now will define the standards, attract capital, and shape the rules. That opportunity should belong to Britain.
Labour’s five missions reflect a country ready to rebuild: to lead in clean energy, raise living standards, and renew public services with modern infrastructure. But none of that is possible without updating the plumbing of the financial system.
Tokenised finance - powered by well-regulated stablecoins - can deliver faster, cheaper, and more transparent payments. That includes trade finance, cross-border remittances, and even real-time settlement contracts and public procurement. Importantly, it
aligns directly with the ambitions set out in the Mansion House reforms and builds on London’s global role as a trusted clearing house for financial services.
But these benefits won’t materialise under a regime that suffocates innovation or penalises growth.
This is a test of seriousness. Does Britain want to shape the financial infrastructure of the future - or merely regulate it once others have built it? If we want to set global standards, create high-value jobs, and re-establish our leadership in financial
innovation, then the time to act is now. Stablecoins must be part of Britain’s economic blueprint.