UK Stablecoin Regulation Faces Industry Pushback as Government Unveils Digital Payments Overhaul
Regulatory Tension in UK Stablecoin Market
The UK government is moving forward with plans to overhaul digital payments regulation, including new rules for stablecoins. However, industry groups and crypto firms have raised concerns that the current proposals could limit the growth of a domestic stablecoin market and reduce the UK's competitiveness.
Industry Concerns Over Proposed Rules
The Payments Association and other industry bodies warn that requirements such as holding 40% of reserves in non-interest-bearing central bank deposits and strict limits on individual and business holdings may hinder innovation. They advocate for a more flexible approach, similar to frameworks in the EU, Singapore, and the US.
- Stablecoins are already used in cross-border payments, trade finance, and merchant transactions.
- Current proposals could make UK-issued stablecoins less commercially viable.
- Industry calls for regulatory adjustments to attract investment.
Government's Digital Payments Vision
During London Fintech Week, the UK government announced reforms to modernise payments regulation. The measures aim to integrate payment services and electronic money into a unified framework, covering both traditional and tokenized payments, including stablecoins. The government also plans to regulate stablecoins used for payments and adapt rules for AI-driven transactions.
Lucy Rigby, Economic Secretary to the Treasury, stated that these reforms are intended to keep the UK competitive and support the growth of the fintech sector.
Tokenized Markets and Broader Implications
Some industry leaders believe the government's reforms signal a shift towards supporting tokenized capital markets, not just stablecoins. The new framework may allow firms to make markets without being regulated as crypto dealers, potentially retaining more liquidity within the UK.
Coinbase Launches Pound-Denominated Stablecoin
Coinbase recently launched tGBP, a pound-denominated stablecoin, highlighting the growing importance of stablecoins in global payments. The company argues that locally denominated stablecoins can reduce payment friction but stresses the need for balanced regulation to ensure competitiveness.
Ongoing Debate and Calls for Clarity
The debate over stablecoin regulation continues, with industry figures and former officials warning that the UK risks falling behind other jurisdictions. Concerns include restrictive holding limits, high reserve requirements, and slow policy progress. Calls for a clear, supportive legal framework are growing as the UK seeks to maintain its position in the evolving digital economy.