The UK is playing the long game on stablecoin regulation, and it could pay off

By Anil Oncu, CEO, Bitpace

The UK has long been seen as a global exporter of regulatory standards. But when it comes to digital assets, it has taken a noticeably more cautious approach. Its current roadmap reflects a strategy that’s grounded in consumer protection and financial stability, chosen over rapid implementation.

Some view this restraint as a sign that the UK is falling behind more agile peers such as the EU, which has already implemented its MiCA framework, the US with its GENIUS Act, or Asian countries such as Singapore and the UAE.

But this slower pace may prove to be a key advantage for the UK. By taking time to consult, observe and build with long-term durability in mind, the UK is shaping a framework that could prove more resilient and more attractive to industry players who prioritise legal clarity and operational certainty.

Stablecoins now form a colossal engine in the crypto financial universe, with their market capitalisation pushing past $290 billion, dominated by US-dollar-pegged tokens. Their uptake by both everyday users and financial institutions is rapidly reshaping global payments and financial infrastructure.

They slash transaction costs, accelerate settlement times and drive inclusion, supporting remittances and giving the unbanked a gateway into modern financial services. This drift in stablecoin growth is also helping legacy banks and institutions narrow the gap with the digital asset frontier and lessen dependence on aging IT systems. With institutions such as JPMorgan piloting cross-border payments with stablecoins, there’s regulatory inertia, and the absence of a sterling-based stablecoin forces UK businesses to lean on dollar and euro alternatives.

The EU’s MiCA framework is already reshaping behaviour. Its stablecoin provisions came into effect in June 2024, and by the end of the year many exchanges had announced that non-compliant stablecoins would be delisted or restricted to EEA users under MiCA.

Platforms are beginning to adjust their listings accordingly, shifting toward stablecoins that meet the new regulatory standards.

In the US, the GENIUS Act, signed in July 2025, establishes a comprehensive federal regime with strict AML/KYC standards, reserve backing and protections for token holders in bankruptcy. The result? Clearer rules and stronger user safeguards.

The market has responded. Circle’s upsized IPO this summer, which raised over $1 billion and surged on debut, showed investor confidence in stablecoin businesses that play by the rules. For UK policymakers, it’s another reminder that clear regulation drives adoption.

The UK is adopting a slightly different approach. The Financial Conduct Authority (FCA) has already taken steps to tighten crypto-related marketing rules and is now consulting on detailed policies for fiat-referenced stablecoins and crypto custody. This steady expansion suggests a more methodical build-out.

A key milestone came with the UK government’s April 2025 policy note, which outlines draft legislation to bring “qualifying stablecoin” issuance and custody under the FCA’s oversight through the Regulated Activities Order (RAO). It also clarifies the alignment between stablecoins, e-money and tokenised deposits. Interestingly, the government opted not to regulate UK-issued stablecoins under existing Payment Services rules just yet, a sign of its intent to complete the necessary prudential and conduct frameworks before enabling full-scale payments use. That legislative package is now targeted for passage by year-end.

In the FCA’s current consultation (CP25/14), proposed rules for the UK cover redemption timelines, custody standards and transparency requirements. These are the mechanisms that matter to banks, merchants and corporate treasurers assessing stablecoin-related risk.

Independent summaries suggest the combination of rapid redemptions and conservative reserve backing could set a high bar for stablecoin credibility, an important signal to financial institutions.

The Bank of England is working on rules for stablecoins that could pose change to the wider financial system. It also teamed up with the FCA to launch the Digital Securities Sandbox, where firms can test blockchain-based settlement in a regulated environment. Together, these steps point to a full ecosystem taking shape, one that includes stablecoin issuers, custodians, payment systems and trading platforms.

This more measured approach could enable the UK to lead in a different and potentially more strategic way, namely, international operability.

One standout idea from earlier FCA discussions is the “payment arranger” model. This would allow overseas fiat-backed stablecoins to be used in UK payment chains, provided a trusted intermediary vets compliance with UK standards. This could prove an effective bridge between regulatory regimes.

If the UK does succeed in creating regulatory mechanisms that align with frameworks like MiCA or the US GENIUS Act, it could offer something the market currently lacks: trusted local oversight combined with global asset portability. That’s exactly what banks, fintechs and global merchants want: rigorous, transparent rules at home, and frictionless integration abroad.

Some UK players are waiting cautiously at the perimeter. Reports that Revolut considered a pound-linked stablecoin, or that ClearBank supports third-party stablecoin reserves, show interest, but not yet full participation.

That hesitancy reflects what we’re hearing from merchants and banks: they’re waiting for clearer rules on redemptions, reserves and custody before integrating stablecoins into their workflows. Once those rules are in place, adoption is likely to follow quickly.

This dynamic is already unfolding in the EU, where MiCA has accelerated engagement with larger merchants now confident in licensing and reserve protections. The UK can drive the same momentum, providing it finalises rules that balance rigour with usability.

While it’s clear that the UK has progressed more slowly than its peers, the combination that it’s working towards, including credible consumer protection, proportionate prudential rules and an interoperable framework that welcomes compliant overseas issuers, could prove transformative.

In fact, the UK could set the global benchmark for interoperability. Get this right, and the UK could lead the next chapter of digital assets. That’s a transformation well worth waiting for.