Stablecoins, although often lumped in with cryptocurrency, are actually a new technology that enables payments and transfers. Digital currency, or payments stablecoins, holds the promise of faster, cheaper, and more secure transfers compared to the more traditional processes widely used today.
There was a period where Central Bank Digital Currency (CBDCs) were the new shiny for payments, but valid concerns regarding governmental abuse and privacy issues have pushed CBDCs to the back burner when discussing retail digital currency. The exception to this is jurisdictions that view more governmental control, or greater authoritarianism, as a desirable outcome. Think China, and other misdirected governments. More likely than not, in the US, the use of CBDCs for retail will be banned by law.
With the approval of the GENIUS Act in the US, payment stablecoins will soon become the norm in the country. Expectations are for digital dollars to buttress the greenback as the world’s preferred reserve currency while fueling more demand for treasuries. Other countries are expected to soon follow the US lead, but the UK – a top global Fintech hub, is said to be falling behind in this inevitable transition.
CI has recently received some commentary from Fintech insiders in the UK who are expressing their concern about the slow progress of the UK government in supporting stablecoin development.
While calling the GENIUS Act a game changer, Riccardo Tordera, Director of Policy & Government Relations at The Payments Association, declares there is a growing disconnect between the Chancellor’s Mansion House speech, where the Chancellor pledged to ‘drive forward developments in blockchain technology, including tokenised securities and stablecoins, ‘ but the reality is falling short. While the Chancellor, Rachel Reeves, claims to want to establish the UK as at the forefront of digital asset development and innovation, the words are not matching the needed progress.
“If the FCA continues down an overly restrictive path, the UK risks undermining its competitiveness and missing out on the substantial economic benefits that stablecoins can deliver,” says Tordera. “If we want to grow the economy, the priority shouldn’t be on selling Bitcoin, but on building the right conditions for innovation—unlocking revenue potential, job creation, and the infrastructure for a digital-era ‘big bang’. Stablecoins are critical to that vision.”
Tordera is of the opinion that the US has a clear trajectory, which is something the UK lacks. He is worried about excessive complexity in the UK when it comes to enabling digital assets.
“We support the FCA’s inclusion of an expanded concept of backing assets, but the proposed management and classification regime is more complex than necessary. Issuers should be permitted to use short, medium, and long-term government bonds—or equivalent high-quality instruments—as backing assets. A simpler, clearer framework would support both innovation and effective oversight.”
Tordera is concerned about the issue of redemption requirements as he believes the FCA’s approach is not practical nor rational.
“Most of our members do not agree with the proposed redemption requirements. In current market practice, redemptions are relatively infrequent, and most users, especially retail holders, exchange stablecoins via intermediated models such as trading platforms. The FCA has not provided a compelling justification for why this well-established business model should be curtailed.”
Tordera explains that as stablecoins become more widespread in usage, value will be realized in spending and not redemption. He states that the UK’s E-Money Regulations of 2011 offer no guidance on redemption timeframes, and “applying rigid timelines to stablecoins would be both illogical and disruptive.”
“Furthermore, mandating redemption within unrealistic timeframes is operationally unworkable, especially when backing assets are not immediately liquid. The FCA’s cost-benefit analysis underestimates the true burden of compliance, and any restrictions on redemption should simply be transparently disclosed to users.”
Tordera calls on the UK to alter its trajectory and lead this sector. He believes the UK has a “generational opportunity, but only if regulation is enabling and not restrictive.”
“ If the UK fails to recognise the implications of this international delta, we risk losing our competitive edge.”
He urges the FCA to adopt a more balanced approach that does not stifle innovation and to collaborate with industry participants to develop the rules. Otherwise, the UK loses out.
Brunello Rosa, the author of Smart Money, also holds concerns about a digital pound. Noting that China and the EU have selected a state-based approach toward digital money, he fears that the UK’s current “hybrid approach” risks being “neither one nor the other solution.”
“In the fierce competition to redefine the global financial architecture of the 21st century, China and the Eurozone have chosen the state-based approach of the central bank digital currency; the US, the private-sector solution of stablecoins, which will also help funding the increasing budget deficit. I fear the hybrid approach chosen by the UK risks being neither one nor the other solution.”
Rosa believes the UK must deploy a “credible CBDC” while fostering private sector innovation, which will help the pound sterling maintain a role as a reserve currency in the digital era.
“The combination of the two will guarantee that the UK will have a strong and autonomous infrastructure for digital assets, independently from the larger jurisdictions, which – in this period of great powers competitions – may end up weaponising their payment systems and digital currencies to exert geopolitical influence over the smaller ones,” explains Rosa. “These are not technical choices that can be left to regulators or agencies such as central banks – these are first order political choices that need to be made by governments, which will bear the political risks and rewards of making them. This is not time for fearful, but for courageous decisions.”
Natalie Lewis, Partner at Travers Smith and Lead of TPA Working Group Digital Currency, sees the GENIUS Act as a clear benchmark in which the UK will be measured. Lewis says that, at a minimum, the UK must be competitive with the US, establishing itself as a jurisdiction where digital asset innovators want to operate.
“Indeed, the UK should not limit itself to the strictures of the GENIUS Act, where we have the potential to be even more attractive, such as by permitting yield-sharing.”
So will the UK government act and let the digital asset sector innovate, and develop the future of payments and value transfers? Eventually, they will have to but the sooner the better.