The Bank of England is signalling a more open approach to stablecoins, prompting a mix of approval and concern from the fintech industry, which is urging regulators to create a framework that fosters innovation rather than stifling it.
In a recent speech, Bank of England Governor Andrew Bailey reflected on the reforms made since the 2008 financial crisis, emphasising the need to protect the financial system’s stability. He drew a clear line between high-risk crypto-assets and stablecoins intended for payments, suggesting the latter must be held to the same standards as traditional money to maintain public trust. Bailey explained that stablecoins used for retail and wholesale payments fall into the “money category” and that understanding this distinction is important for designing the approach to regulation.
This apparent shift in tone has been welcomed by many in the digital asset sector. Nick Jones, Founder and CEO of Zumo, commented that the Bank’s “long-held scepticism towards digital assets is starting to dissipate,” calling it a “welcome change in direction.”
Jones also noted that Bailey is now “finally recognising the fact that digital assets can coexist with fiat currencies in a reimagined future financial system.” He believes that by announcing an upcoming consultation, the Governor is opening the door to the industry collaboration needed for the UK to reap the benefits.
However, this optimism is tempered by fears that the UK may be moving too slowly compared to other jurisdictions. Mark Aruliah, Head of EMEA Policy and Regulatory Affairs at Elliptic, described the Bank’s move as a “cautious embrace” but warned that “with the U.S.’s GENIUS Act and the EU’s MiCA already setting frameworks in motion, there is a very real risk that this moderate boost of confidence could be too little too late.”
A specific point of contention is the suggestion of imposing strict limits on stablecoin holdings, a measure previously floated by the Bank. Zumo’s Jones warned such a move would “damage the UK’s competitiveness as a financial hub.” This sentiment was echoed by Coinbase’s Tom Duff-Gordon, who stated bluntly: “Imposing caps on stablecoins is bad for U.K. savers.”
Industry participants argue that the goal should not be to restrict access but to build a robust and clear regulatory environment. Aruliah explained that as stablecoins become more integral to global finance, regulatory harmony is essential. He called for the Financial Conduct Authority’s forthcoming rules to establish a “scalable framework that is built on transparency, investor protection, and AML protections” to balance trust with innovation.
The consensus from the fintech sector is that while appropriate regulation is necessary, it must be enabling rather than prohibitive. The industry sees a significant opportunity for a GBP-denominated stablecoin to make inroads into what Jones referred to as the “heavily dollarised digital economy,” but this requires a forward-thinking approach from UK regulators. The challenge for the Bank of England will be to uphold its core principles of financial stability while creating a regime that allows the UK to compete on the global stage.
