The UK is racing to create new rules to regulate the stablecoin sector. Stablecoins are typically tied to another asset, like fiat currency. There have also been algorithmic stablecoins issued, with one failing spectacularly. While stablecoins are frequently affiliated with crypto as stablecoin usage is widely used as an on/off ramp for crypto trading. In reality, stablecoins should be viewed as the future of payments; faster, cheaper, and easier to manage.
While there has been a lot of interest in CBDCs, or central bank digital currencies, privacy concerns may doom CBDCs for retail usage, and thus, stablecoins are poised to become digital currencies.
Chris Jones, Managing Director at PSE Consulting, recently commented on the UK’s push for new legislation to regulate stablecoins. He said the regulatory framework is a welcome step but cautioned they may be focusing on the wrong challenge.
“The biggest opportunity for stablecoins isn’t at the checkout or as an investment asset; it’s in fixing friction in the global financial system, particularly in the foreign exchange market (FX) and cross-border payments,” said Jones. “Consumer payments in the UK aren’t broken. Card networks and bank rails work exceptionally well here — introducing stablecoins for retail use cases risks adding complexity without solving a more immediate real challenge. Where stablecoins do show real promise is behind the scenes: acting as the “grease in the machine” of international transactions, reducing settlement times, and offering programmable money infrastructure for complex B2B flows.”
Jones states that London is the world’s largest FX hub and it it wants to solidify its position further, regulators should focus on supporting innovation where it matters: “solving FX inefficiencies, not regulating stablecoins like retail financial assets. That’s where the UK can really lead meaningfully.”
“This isn’t about resisting innovation — it’s about directing it,” explained Jones. “Let’s ensure the City of London has the tools to modernise global payments infrastructure, rather than chasing stablecoin use cases that aren’t fit for purpose right now.”