UK Stablecoin Regulation: A Work in Progress
Clash between Rachel Reeves and Andrew Bailey may jeopardize the aspirations for a secure digital currency in Britain
In the rapidly evolving world of digital finance, the United Kingdom is making significant strides in developing its regulatory framework for stablecoins. The Financial Conduct Authority (FCA) has recently published two consultation papers, CP25/14 and CP25/15, focusing on the regulation of stablecoin issuance and cryptoasset custody [1][3].
Key proposals include requiring stablecoin issuers to fully back their tokens with secure assets and ensuring robust custody practices to protect client assets [1]. However, industry leaders are urging the UK to adopt a national stablecoin strategy to enhance its position as a global financial hub. They argue that the current regulatory framework is overly formalistic and does not effectively capture the functional nature of stablecoins, which are critical for integrating traditional and digital financial systems [2][4].
A Comparison with the EU
In contrast, the European Union has been more proactive in establishing a comprehensive regulatory framework for digital assets through the Markets in Crypto-Assets (MiCA) Regulation [5]. MiCA includes specific provisions for stablecoins, requiring them to be fully backed by reserves and to comply with strict operational and governance standards.
While the EU has a more defined regulatory framework through MiCA, the UK's approach is still evolving, with ongoing consultations and calls from industry leaders for clearer and more supportive regulations.
A Comparison with the US
The regulatory landscape for stablecoins in the United States is fragmented, with both federal and state-level oversight. There is a growing push for clearer federal regulations, but currently, stablecoins are overseen by various agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and state banking regulators [4][5]. Unlike the EU's MiCA, the US does not have a single comprehensive framework for digital assets.
The Road Ahead
As the market for stablecoins continues to grow, with a total market cap of over £200bn [6], the need for clear and consistent regulations becomes increasingly important. The City watchdog is set to publish its final rules on stablecoin regulation in 2026 [7], and it remains to be seen how the UK's regulatory landscape will shape up in comparison to the EU and US.
Chancellor's reference to plans to drive forward "developments in blockchain technology including... stablecoin" in her 2025 Mansion House speech [8] signals a commitment to staying competitive in the digital finance arena. However, the success of these plans will likely depend on the UK's ability to align its regulatory approach with industry needs and global best practices.
References Summary:
- UK: The UK is developing its regulatory framework with ongoing consultations and industry calls for a national strategy.
- EU: The EU has established the MiCA regulation, providing a uniform framework for digital assets.
- US: The US lacks a comprehensive federal framework, with oversight split among various agencies.
- The market for stablecoins is over £200bn and continues to grow.
- The FCA is set to publish its final rules on stablecoin regulation in 2026.
- Chancellor's reference to plans to drive forward "developments in blockchain technology including... stablecoin" in her 2025 Mansion House speech signals a commitment to staying competitive in the digital finance arena.
- The United Kingdom is making strides in developing its regulatory framework for stablecoins in the banking and finance sector, nudged by the need for integrating traditional and digital financial systems.
- In contrast, the European Union has established the MiCA regulation, a uniform framework for digital assets, including stablecoins, setting a proactive example in the finance industry.
- The regulatory landscape for stablecoins in the United States is fragmented, with federal and state-level oversight, highlighting the need for clearer and more streamlined regulations in technology and business.
- As the market for stablecoins continues to expand and technology advances, it is crucial that the United Kingdom's regulatory approach aligns with industry needs, global best practices, and the competitive digital finance arena.
