UK’s Conservative Approach to Stablecoin Regulation May Leave It Lagging Behind International Competitors

The United Kingdom is facing mounting calls to establish a comprehensive regulatory structure for pound-based stablecoins as it aims to preserve its status as a global financial leader. Regulators have suggested strict caps on both stablecoin holdings and the assets backing them, prompting industry experts to caution that the UK could lose ground to countries like the United States and Singapore, which are moving forward with more flexible frameworks. The Bank of England (BoE) has proposed provisional limits of £20,000 for individuals and £10 million for corporate stablecoin holdings, while

to be invested in short-term UK government securities. While these policies are designed to address risks to financial stability, critics argue they may hinder technological progress and discourage capital inflows.

The BoE’s recommendations, which have evolved since initial talks in 2023, demonstrate a prudent stance toward managing the potential threats posed by systemic stablecoins—digital currencies that could significantly impact payment systems and disrupt conventional banking.

Deputy Governor Sarah Breeden of a regulatory regime that is “future-ready,” recognizing stablecoins’ potential to enhance payment systems while underscoring the need for robust protections. Nevertheless, detractors believe that mandating 40% of reserves as non-interest-bearing central bank deposits could undermine current stablecoin business models and leave UK issuers at a disadvantage compared to those in the US, . Varun Paul of Fireblocks, who previously led the BoE’s fintech hub, for the UK to set a global standard, reflecting the ongoing struggle between regulatory caution and fostering innovation.

The UK’s measured approach stands in contrast to rapid progress elsewhere. The US Senate’s GENIUS Act, which seeks to mainstream stablecoins, and the EU’s MiCAR regulations, set for full implementation by late 2024, highlight the urgency for the UK to solidify its stance. Industry voices, including Agant CEO Andrew MacKenzie,

leading the way, it can draw lessons from international examples to develop a robust regulatory system. At the same time, the BoE’s ongoing consultation, , is gathering input on how to balance risk controls with practical usability, especially for companies that depend on holding significant stablecoin reserves.

These discussions are taking place as the UK’s financial sector undergoes significant transformation.

of savings accounts in the UK—offering 3.75% interest and FSCS insurance—illustrates the convergence of cryptocurrency and traditional banking. As the first crypto-focused exchange to provide a regulated savings product in the UK, Coinbase is positioning itself as a comprehensive financial platform. Such developments reflect increasing demand for integrated financial services, but the BoE’s proposed restrictions could limit uptake among both individuals and businesses.

Economic pressures are adding urgency to the stablecoin policy debate.

a modest 0.1% quarterly growth, with notable declines in manufacturing and industrial output. As the Bank of England considers further interest rate reductions, stablecoins may present an alternative for small and medium-sized enterprises seeking new financial solutions. Meanwhile, —achieving 6th place in the 2025 Deloitte Technology Fast 50 with 2,842% growth—demonstrates the UK’s capacity for digital financial innovation.

Janine Hirt, CEO of Innovate Finance, and Lord Vaizey, co-chair of Parliament’s Crypto and Digital Assets APPP, have both called for regulators to carefully balance prudence with ambition. While temporary restrictions may be justified,

for lifting them raises questions about the UK’s long-term competitiveness. As stablecoin adoption accelerates worldwide, the UK’s ability to blend strong oversight with support for innovation will shape its future role in digital finance.