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The UK crypto industry is frustrated by the country’s slow progress towards regulatory clarity on stablecoins and has warned that, without a supportive framework, innovation may migrate to more welcoming jurisdictions.
In an open letter to UK Chancellor Rachel Reeves, industry leaders warned that the UK risks missing a “transformative moment” in financial services innovation if it fails to embrace stablecoins.
“The global regulatory tide is turning,” the letter says. “As other jurisdictions move decisively, the UK must act now to avoid being a rule-taker rather than a rule-maker in the digital asset era.
“This is an opportunity to transform regulatory ambiguity into competitive advantage. With leadership and foresight, the UK can position itself as the premier global hub for stablecoin innovation - reaffirming its role at the heart of international finance for decades to come.”
The letter, signed by 30 crypto CEOs and executives, argues that the UK urgently needs to develop a “national strategy” on stablecoins – one that positions stablecoins not as a “risk to be contained” but as a “financial infrastructure to be responsibly embraced”.
With signatories including Coinbase, Kraken, Fireblocks and Zodia Custody, the letter urges HM Treasury and the Bank of England (BoE) to prioritise a “forward-thinking” stablecoin strategy that is “aligned with the national interest”.
It suggests that this would include:
- Enabling domestic issuance and safekeeping of stablecoins by both banks and regulated non-banks.
- Integrating regulated foreign stablecoins into the UK’s financial ecosystem.
- Embedding stablecoin considerations into trade and foreign economic policy.
- Funding research and commercial development of the stablecoins ecosystem.
The letter praises Reeves for her 2025 Mansion House speech, during which she committed to “driving forward developments” in blockchain technology, including stablecoins and tokenised securities.
Reeves also said that, with the right policy framework, the UK can place itself “at the forefront” of digital asset innovation.
However, whereas jurisdictions such as the US, Hong Kong, Japan and Singapore have already enacted new stablecoin laws, the UK is now trailing behind.
Moreover, the UK is working towards a comparatively complex framework that has failed to win industry support.
‘Onerous’ rules will drive firms away, says Coinbase
Keith Grose, senior managing country director for Coinbase UK, told Vixio that stablecoin innovation is already bypassing the UK due to its slow progress toward regulatory clarity and to the “very onerous” nature of its current proposals.
“Founders need regulatory clarity to have the confidence to innovate and build,” he said. “Without final rules, we are unlikely to see stablecoin innovation in the UK.
“We often hear the UK saying that it wants a ‘mixed payments ecosystem’ where different forms of digital money can coexist.
“But to achieve this, we need a regulatory framework whereby stablecoins are allowed to compete on a level playing field with other forms of digital money.”
Grose criticised the UK’s current proposals for imposing “more onerous” requirements on stablecoin issuers than on e-money firms, including higher capital requirements.
Similarly, the Coinbase country manager argued against the UK’s plans to prohibit stablecoin issuers from paying interest to stablecoin holders – a prohibition that would not apply to firms offering tokenised deposits.
However, jurisdictions that have already enacted stablecoin regulations likewise prohibit stablecoin issuers from paying interest to holders.
UK’s proposed stablecoin rules unusually complex
As covered by Vixio, the latest proposed rules for stablecoin issuers from the Financial Conduct Authority (FCA) are the toughest of any major jurisdiction to date.
In contrast to other jurisdictions, the FCA’s reserve requirements would be highly dynamic, shifting every 14 days based on the issuer’s daily redemptions.
The proposals would subject firms in the UK to a much higher compliance burden than those in other jurisdictions for the same activities.
Coinbase's Grose focused on the proposed regulations that UK stablecoin issuers are likely to face when their stablecoin becomes “systemic”.
Under current proposals, once a stablecoin receives this designation, its issuer would be subject to a separate prudential framework overseen by the BoE.
Although the criteria for the “systemic” designation are to be determined, the BoE has shared the main requirements that these issuers are likely to face.
In Grose’s view, the BoE’s proposed framework for systemic stablecoin issuers is fundamentally unworkable.
The main difference between the FCA framework and the BoE framework is that issuers under the BoE framework would only be allowed to hold central bank deposits as reserves.
Moreover, the BoE has said that it would not pay interest on central bank deposits that are held as backing assets for systemic stablecoins.
Issuers under the FCA framework could generate revenue from various backing assets, including government bonds and short-term deposits. By contrast, those under the BoE framework would have to generate revenue solely from transaction fees.
“Once a stablecoin becomes systemic and moves from the FCA regime to BoE supervision, the BoE would require a completely different business model,” said Grose.
“For all these reasons, we see a worrying lack of stablecoin innovation in the UK.”
Timeline for UK stablecoin regulation
The FCA and BoE frameworks are both works in progress, but it seems unlikely that the official position on the main points will change significantly.
Both regulators are working on a timeline that offers only a small window of opportunity for firms to apply pressure for amendments.
Under the FCA’s Crypto Roadmap, the regulator aims to publish final policy statements for the sector, including stablecoins, in 2026, with the new regime going live later that year.
For firms planning stablecoin activities in the UK, the remainder of 2025 will be a critical period for engaging with regulators.
As the joint letter makes clear, however, the industry appears to be losing faith in the UK’s handling of digital asset regulation.
