Market participants warned that the U.K. needs to decide its approach to digital money, especially towards stablecoins, or it risks falling behind other jurisdictions.

Katie Harries, head of policy, Europe at U.S.-listed digital asset exchange operator Coinbase said that the biggest challenge for the U.K. is that it has not set an approach to digital money. For example, the country needs to decide whether to lean into tokenized deposits, central bank digital currencies (CBDCs) or stablecoins. She spoke on a panel at City & Financial Global conference on The UK’s New Cryptoasset and Stablecoin Regulatory Regime conference in London on 26 November 2025

Riccardo Tordera-Ricchi, director of policy and government relations at The Payments Association, a U.K. trade body, said on the panel: “If the U.K. does not make a decision, we will become a flyover zone and this cannot happen in a country that prides itself on being a global center for financial services.”

The U.S. has ruled out central bank digital currencies and is leaning wholeheartedly into stablecoins, which Harries said was an important lesson for the U.K. One of the reasons for this decision is that the U.S. views tokenization as a strategic objective to preserve the competitiveness of its global capital markets and realizes that stablecoins are the only onchain settlement asset that currently exist.

Harries said: “I am concerned for the UK if it bans the use of stablecoins for wholesale settlement and core markets for tokenization.”

In addition, the U.S. knows that jurisdictions around the world want to put their currencies onchain and that allowing the private sector to innovate quickly preserves the dominance of the U.S. dollar.

“If the U.K. wants to preserve the standing of the pound as a global reserve currency, it needs to lean into stablecoins,” said Harries.

The U.S. also understands that stablecoin issuers will be large buyers of short-term government debt, which achieves the strategic objective of lowering borrowing costs. The U.K. has the longest average tenure of government debt in the G7, according to Harris, so this is an opportunity to reduce borrowing costs.

“We need a strategy around digital money that allows GBP stablecoins to emerge at scale,” said Harries. “We need a framework that addresses the risks but allows innovation to occur.”

Regulation

The Bank of England has launched a consultation on regulating sterling-denominated systemic stablecoins.

The regulator has proposed temporary holding limits of £20,000 per coin for individuals and £10m for businesses (with an exemptions regime to allow the largest businesses to hold more if required), which it said would safeguard continued access to credit as the financial system gradually adapts to new forms of digital money. The central bank said these limits would be removed once the transition no longer poses risks to the provision of finance to the real economy and would not apply to stablecoins used for settling wholesale financial market transactions in the Bank and FCA’s Digital Securities Sandbox. 

Harries said the cap in not needed as there is no evidence that the issuance of systemic stablecoin results in a precipitous outflow of deposits. She cited the U.S where the market cap of Circle’s USDC stablecoin has increased and bank deposits have also grown. “It’s not a zero sum game,” she added.

She also argued that if regulators put an ownership cap on stablecoins, they should also put a cap on other financial instruments with a similar economic structure, such as money market funds. In addition, she highlighted that the Bank has not explained what a “temporary” cap means or the conditions for assessing whether caps are needed, and when they might be lifted.

“This is absolutely crucial,” Harries added. “We need to allow innovation in money.”

Tordera-Ricchi said The Payments Association also opposed the potential ownership caps on stablecoins. He added: “We do not have any limits on the amount of money we can hold in cash, in our bank account or in any other form.”

In addition, Tordera-Ricchi  highlighted that other central banks have not proposed ownership caps.

“I don’t believe the Federal Reserve or the European Central Bank don’t care about financial stability but they have not proposed these kinds of rules,”he added. “I think we are being a little bit too cautious.”

Harries said the UK Financial Conduct Authority also needs to reconsider the ban on stablecoins paying interest. For example,  Canada is encouraging the payment of interest on holdings of the Canadian dollar stablecoins, because they want to compete with the U.S. dollar.

“We shouldn’t be protecting the legacy system at the expense of innovation for digital money,” she said. “We need to think through the transition in terms of what is the best in the interest of consumers.”

FCA

David Geale, executive director, payments and digital finance at the Financial Conduct Authority and payment systems regulator managing director, also gave a speech at the conference. He said The Bank of England’s recent consultation on systemic payments using stablecoins is an important next step and the FCA will continue to work closely with the Bank to ensure a coordinated approach.

Geale believes there is a way to ensure consumers remain safe, supported by balanced and appropriate”” regulation as the FCA wants the U.K.’s crypto and stablecoin market to be well-balanced, innovative and underpinned by integrity and trust.

“We already supervise cryptoasset businesses for anti-money laundering, counter-terrorist financing and financial promotions,’ he added. “Now, we find ourselves at a crossroads as the government works to bring crypto into our perimeter.”

The U.K. regulator has published a series of discussion papers on stablecoin issuance, cryptoasset custody, a prudential regime and cross-cutting requirements.to explore the issues and to elicit the full range of views before consulting on specific proposals. Geale said there is to come on market abuse, admissions and disclosure, and prudential and regulated activities.

“By early next year, we expect to have another consultation paper on consumer duty, regulatory reporting and more,” said Geale. “After taking the feedback into account, we’ll publish policy statements to set out the final regime before opening our gateway to firms.”

On 26 November 2025 the FCA said in a statement that it has accepted Eunice, a regtech platform into its regulatory sandbox to explore an industry-led solution to improve transparency of the UK’s crypto markets.

A working group convened and led by Eunice has developed standardised, industry-led crypto disclosure templates that will make it easier for firms to meet document requirements, to ensure investors have the right information to make well-informed decisions. Eunice is working alongside some of the largest cryptoassets firms including Coinbase, Crypto.com and Kraken to design and test a solution for disclosing information.

As part of the FCA’s regulatory sandbox, Eunice will experiment with the disclosure templates to achieve maximum transparency. The results of the sandbox will influence how the FCA approaches disclosure requirements.

Yi Luo, chief executive and co-founder of Eunice, said in a statement: “The FCA Sandbox is where regulators and industry participants meet to build the foundations for a safer and smarter digital asset market. Leading the work around disclosures is a great point of pride for Eunice, which was founded to bring integrity and transparency to digital assets at a time when institutions are stepping into the space.”

Geale continued that the FCA has also opened a stablecoin-specific cohort in its regulatory sandbox to support stablecoin issuers in testing UK-issued stablecoins, Firms can apply until 25 January.

“It’s a unique chance for innovative firms to test their stablecoin products and services under the UK’s evolving regulatory regime, potentially driving new ideas to benefit both wholesale and retail customers,” he added. “This truly is a very exciting and groundbreaking initiative.

It supports agile policymaking and industry development, and gives firms the unique opportunity to provide us with practical feedback.”

A “major” firm has already been accepted and is gearing up for testing in the next couple of months, according to Geale.

In addition, the FCA  will be hosting in-person stablecoin policy sprints in March next year to consider retail and wholesale use cases for stablecoins, and help determine whether regulation is needed.

“We want to bring together participants from traditional finance and payment and fintech firms to explore how stablecoins can improve trust, speed, cost and interoperability across different use cases,” he said. “Expressions of interest for the sprints will open in January, so keep an eye out for more details.”

The FCA is also heading up the Transatlantic Taskforce for Markets of the Future, in partnership with the U.S. The two countries will consider ways to collaborate on digital assets while they develop legislation and regulatory regimes and improve links to boost growth and competitiveness.

Geale said he would be remiss not to touch on the GENIUS Act, the U.S federal framework for stablecoins.

“Some commentators say we are behind the US,” he added. “In my view, we aren’t. We have consulted on regulatory requirements for stablecoin issuers and prudential requirements that clarify what is expected of firms – thus providing more detail than legislation alone can.”