Key Takeaways
- Regulatory tension is rising.
- Despite concerns, the UK government is advancing a broader digital payments overhaul.
- Concerns are growing about the UK falling behind.
Britain’s payments industry is urging changes to proposed stablecoin rules as the government sets out plans to overhaul digital payments regulation.
The move comes as Coinbase announced the launch of a pound-denominated stablecoin, just months after criticizing the UK.
Industry Warns UK Risks Falling Behind on Stablecoins
The Payments Association said current regulatory proposals could hinder the development of a domestic stablecoin market, even as the technology gains traction globally.
In a report published on Wednesday, the industry body said stablecoins are already being used across five key areas:
- Cross-border payments
- Trade finance
- Agentic commerce
- Merchant payment costs
- Tokenization
The industry body said that while the technology could cut cross-border transaction costs by more than 99% in some cases, many structural hurdles remain in the country.
The group also raised concerns about Bank of England proposals requiring issuers to hold 40% of reserves in non-interest-bearing central bank deposits and limits on holdings of £20,000 for individuals and £10 million for businesses.
“Our community’s committed engagement on the recent stablecoin regulation consultations from the FCA and BoE reflects that agreeing on the right framework is an important topic for our members,” said Riccardo Tordera-Ricchi, the association’s vice president of policy and government relations.
“Nonetheless, it’s evident that the current proposal falls short of providing an adequate foundation for a competitive and attractive stablecoin framework,” he added.
The association called for a more flexible approach aligned with jurisdictions such as the EU, Singapore and the US, warning that without adjustments the UK could struggle to attract investment.
Government Outlines Digital Payments Overhaul
The warnings come as the UK government unveiled a package of reforms during London Fintech Week aimed at modernising payments regulation.
The measures include plans to integrate payment services and electronic money into a single regulatory framework covering both traditional and tokenized payments, including stablecoins.
The government also said it would move to regulate stablecoins used for payments under a new regulated activity and explore how rules should adapt to AI-driven transactions.
Economic Secretary to the Treasury Lucy Rigby said the reforms were designed to keep the UK competitive.
“Fintech is a true British success story, and we are backing the industry to maintain its competitive edge and go even further and faster in driving growth,” she said.
“Today’s package is our latest stake in the ground as we build a payments ecosystem that is secure, competitive and fully equipped to harness the opportunities created by rapid technological change,” Rigby added.
The government also appointed former interim FCA chief Chris Woolard as Wholesale Digital Markets Champion to lead efforts to develop tokenized financial markets.
Tokenized Markets Highlight Broader Shift
Some industry voices suggest the government’s latest moves could have wider implications beyond just stablecoins alone.
Robin Nordnes, Founder and CEO of Raiku, told CCN the reforms indicate a more responsive regulatory approach to the technology.
“The government has done something unusual here, it’s listened, and moved quickly to correct its own unintended consequences,” Nordnes said after reviewing the policy documents.
He pointed to the newly introduced stablecoin payments carve-out as a pragmatic step, but argued that more significant changes lie elsewhere in the framework.
“The stablecoin payments carve-out is sensible, he said. “But the bigger changes sit in section 4.”
He explained that the UK was proposing to allow firms to make markets without being regulated as crypto dealers.
This “closes a structural asymmetry that was pushing liquidity offshore,” he said.
“Taken together, the UK is positioning itself as a home for tokenised capital markets, not just a stablecoin jurisdiction.”
Coinbase Pushes UK Stablecoin Adoption
The debate over regulation comes as crypto exchange Coinbase on April 22 announced the global launch of a pound-denominated stablecoin, tGBP, underscoring growing industry momentum.
“Stablecoins are having their ‘iPhone moment’. They are no longer just a tool for crypto traders; they are becoming central to the global payments system,” the company said.
Coinbase said the stablecoin market has grown to more than $300 billion and could reach $2 trillion in the coming years, with over $30 trillion in transactions settled in 2025 alone.
The firm argued that locally denominated stablecoins could help reduce payment friction and eliminate foreign-exchange risk for the country, but also said it needed regulation to stay competitive.
“Ensuring stablecoins can compete on a level playing field with other forms of digital money” and avoiding “overly punitive prudential requirements” would be key to building a competitive UK ecosystem, Coinbase said.
Coinbase’s Past Criticism
The latest push to build a domestic stablecoin framework comes just a year after Coinbase publicly mocked Britain’s economic and financial environment in a viral advertisement.
The US-based exchange released a satirical musical video portraying the UK as a country struggling with rising living costs and declining public services.
The ad, which was later banned from airing on UK television, featured scenes of unaffordable housing and exaggerated price inflation, with lyrics including:
“These fish fingers are a steal… just one hundred quid a meal.”
Coinbase CEO Brian Armstrong defended the campaign, suggesting attempts to block it would only amplify its reach.
“We welcome the attacks and any other attempts to censor this message, as it just helps it spread,” he said on X at the time.
Armstrong said the message was not aimed at any political party but at broader systemic issues, arguing that “the traditional financial system is not working for many people and crypto represents a way to improve that.”
Armstrong’s Personal Criticism of UK Stablecoin Rules
Armstrong has also been an outspoken critic of the UK’s proposed stablecoin regime, warning it could undermine the country’s competitiveness.
The Bank of England has proposed capping individual holdings of systemic stablecoins at £20,000 and business holdings at £10 million.
Under the proposal:
- Individuals would be limited to £20,000 per systemic stablecoin.
- Businesses would be limited to £10 million per systemic stablecoin.
- Large firms could request higher limits if they demonstrate operational need and robust risk controls.
In a post on X in February, Armstrong said draft rules under consideration by the Bank of England risk holding back innovation.
“Stablecoin rules in the UK are being finalized, and are at risk of preventing the UK from being globally competitive in the digital economy,” he wrote.
He added that the current direction of travel “will act as an innovation blocker”, pointing to limits that would cap individual holdings at £20,000 and business holdings at £10 million.
“The UK has a long history of being a financial hub. Embracing and encouraging innovation, especially when other countries are moving fast here, is important for maintaining that,” Armstrong said.
His comments came as a petition backed by industry advocates calling for a more crypto-friendly framework gained traction, surpassed 80,000 signatures ahead of its March deadline.
The Bank of England proposals would also require issuers to hold 40% of reserves in non-interest-bearing central bank deposits, a measure critics say could make UK-issued stablecoins less commercially viable.
Concerns of UK Falling Behind
The debate over stablecoin regulation has intensified amid broader concerns that Britain is losing ground to US in the broader crypto space.
Former finance minister George Osborne said last year that the UK is “being completely left behind” on crypto and stablecoins, urging faster action to create a clear legal framework.
“The chancellor says she’ll ‘drive forward’ on stablecoins, whatever that means, while the Bank of England governor remains unconvinced that commercial banks should issue them,” Osborne wrote in the Financial Times.
“This hesitation risks irrelevance.”
Osborne argued that while other major jurisdictions, including the US have moved to legislate the sector and Britain’s approach risks marginalising Sterling.
Other industry figures have echoed those concerns.
Mohamed Ezeldin, head of tokenomics at Animoca Brands, told CCN last year that the US is moving more decisively despite regulatory gaps.
“So the US is actually in a much better position as of today for crypto, even though regulation is still lagging behind,” he said.
Ezeldin added that “we’re not faring too well as the UK right now… we’re getting battered and bruised.”
Ezeldin pointed to tax burdens and slow policy progress as factors pushing founders to relocate to jurisdictions such as Dubai and Lisbon.
“The UK says it wants to be a leader in emerging technologies… but realistically, no steps have been made to alleviate any of the pain points,” he said.
Nordnes also cautioned that regulatory clarity alone will not be enough to secure long-term competitiveness.
“Regulation is only half the work. Institutional markets need execution infrastructure that is deterministic and predictable under load,” he said.
“Rules and regulations only pay off if the rails beneath them can carry the volume they invite.”
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Kurt Robson is a London-based reporter at CCN, specialising in the fast-moving worlds of crypto and emerging technology. He began his career covering local news in Cornwall after graduating from Falmouth University with First Class Honours in Journalism. There, he cut his teeth on everything from council meetings to missing swans.
He quickly rose through the ranks to become a frontline journalist at several of the UK’s leading national newspapers. Over the years, he has interviewed musicians and celebrities, reported from courtrooms and crime scenes, and secured multiple front-page exclusives.
Following the upheaval of the COVID-19 pandemic, Kurt shifted his focus to technology journalism—just ahead of the AI boom. With a natural curiosity and a trained eye for emerging trends, he has found a new rhythm in reporting on innovation.
At CCN, Kurt's work focuses on the cutting edge of crypto, blockchain, AI, and the evolving digital world. Drawing on his background in people-first reporting and his deep interest in disruptive tech, Kurt delivers stories that are insightful, entertaining, and human-centric.
