With momentum building around major US regulatory initiatives, like the CLARITY Act, is the UK at immediate risk of forfeiting its first-mover advantage, or can cross-border regulatory dialogue keep the nation competitive?
While the legislative process moves at different speeds across jurisdictions, the direction of travel toward a clearer regulatory framework for digital assets is clear.
Developments in the US signal growing momentum, but there have also been important steps in the UK, including ongoing dialogue between the Financial Conduct Authority (FCA) and US Securities and Exchange Commission (SEC) on common approaches to stablecoins and tokenised assets.
To ensure that the UK is not left behind, there is a question of how we can move faster.
The nation has a great network and great industry bodies, and what is really important is that we continue to drive that regulatory agenda across both the adoption of stablecoins and digital asset-related regulation.
When financial institutions talk about moving faster, a lot of the concern centres on capital defaulting to US dollar rails. Why are the underlying economics for a sterling-denominated stablecoin so much tougher for issuers compared to dollar alternatives?
The difference in economics comes down to a combination of structural market demand and regulatory design.
The US dollar remains the primary settlement currency for global trade, commodities, and FX markets. Dollar-denominated stablecoins scaled rapidly because they addressed an immediate demand for digital dollar access and cross-border settlement. For sterling stablecoins, the primary use case is less about domestic payments, where the UK already benefits from mature infrastructure like Faster Payments, and more about international trade and wholesale multi-currency settlement. At the same time, the economics for issuers are heavily dictated by reserve asset requirements. Frameworks that require higher proportions of unremunerated central bank deposits or restrict reserve asset composition directly affect issuer margins.
When combining a smaller natural domestic market with yield limitations on reserves, the commercial case for issuing a sterling stablecoin becomes more challenging. Regulatory progress in the UK has shown an encouraging willingness to adjust these parameters, but for a sterling stablecoin ecosystem to scale, the priority should be creating commercial conditions that allow issuers to build sustainable businesses alongside robust consumer protections.
With policymakers making pragmatic adjustments, is the UK’s emerging framework actually viable enough to support a commercial sterling stablecoin, or does it leave the market as an outlier?
Beyond international regulatory coordination, commercial viability remains an important consideration.
UK stablecoin economics are materially different to the US, and it remains to be seen if the UK’s framework will be both safe and commercially attractive enough to support a competitive sterling-denominated stablecoin ecosystem.
Otherwise, businesses will simply default to dollar-denominated infrastructure.
Policymakers recognise this challenge, with pragmatic steps like the reduction of the backing asset requirement from 40 per cent to 30 per cent, but it still makes the UK a global outlier and presents a headwind for any potential issuer.
Even with those regulatory headwinds for sterling issuers, how are institutional treasuries and banks actually approaching stablecoins today? Are they still viewing them through a 'crypto' lens or as core financial plumbing?
There is a clear distinction emerging in how financial institutions view this technology. The conversation has moved away from treating stablecoins as part of speculative digital asset trading and toward evaluating them as modern payment infrastructure.
Treasury teams and corporate institutions focus on speed, cost, operational availability, and liquidity management.
Traditional cross-border payments still experience friction, as they remain bound by clearing hours, correspondent banking networks, and settlement delays.
Stablecoins offer a mechanism for continuous, instant settlement with built-in programmability, which can provide greater efficiency for corporate treasury management, cross-border payments, and multi-currency operations.
Institutions increasingly approach stablecoins not as a replacement for fiat money but as an efficient rail to move value.
The primary focus for banks and treasuries today is how these rails connect to existing operations.
The key questions centre on how seamlessly fiat converts into digital assets and back again, how identity and compliance controls are maintained at the infrastructure layer, and how interoperability across different networks is achieved.
Regulators and institutions are increasingly drawing a hard line between speculative digital assets and tokenised payment rails. How critical is that distinction in shifting stablecoins into mainstream UK payment infrastructure, and what needs to happen for TradFi and digital rails to work together seamlessly?
A core theme across regulatory discussions globally is the clear distinction between stablecoins as payment rails and crypto-assets as an investment class.
This difference is gaining strong recognition among financial institutions.
Stablecoins are increasingly being used to move money — instead of just holding value — and their primary benefit lies in enabling faster settlement, greater interoperability, and more efficient cross-border payments.
As adoption grows, the priority should be building the infrastructure that allows traditional finance and digital assets to work seamlessly together.
We have seen plenty of pilots and testing grounds like the FCA Digital Securities Sandbox. What do UK institutions need to learn from foreign markets, particularly the US, to take these settlement rails out of the sandbox and into production?
Sandboxes and live trials are a practical step for proving technical feasibility, but the transition to production scale requires underlying payment rails that can keep pace with tokenised assets, along with clear operational rules.
A consistent lesson from international developments, including the US legislative process, is that institutional adoption accelerates when there is clarity on the payment leg of a transaction. Tokenising the asset is only part of the equation; if the asset can settle instantly but the money still has to move through legacy infrastructure, you have not removed the underlying friction. If the asset moves instantly onchain while the cash leg relies on legacy rails, the overall friction remains.
To move from pilots to production, UK market participants and infrastructure providers should focus on connecting traditional payment systems with digital asset networks.
That requires establishing clear expectations around redemption, reserve management, and operational resilience. When institutions have certainty on how fiat and digital liquidity interface in real time, tokenisation can move from testing environments into daily commercial workflows.
Examining the progress of international regimes, what broader structural takeaways should UK institutions harvest as they attempt to transition their digital asset strategies out of testing sandboxes and into scaled, cross-border commercial workflows?
As markets move from sandboxes and pilots toward finalised regimes globally, firms should look at how stablecoins can function as modern payment infrastructure.
This evolution extends beyond the digital asset ecosystem itself. It provides a practical foundation to streamline how regulated businesses move, manage, and settle money across borders in the future.
Looking ahead over the next 12 to 18 months, what will be the key sign that the UK is successfully keeping pace with global digital asset hubs rather than falling behind?
The clearest indicator of success will be the transition from bespoke trials to live, commercial transaction volume running on regulated, interoperable infrastructure.
Three specific developments will signal meaningful progress.
Firstly, regulatory execution: the framework needs to give businesses clarity and certainty while avoiding unnecessary complexity as traditional and digital financial services increasingly converge.
Secondly, international alignment: as regimes take shape globally, alignment between major regulatory bodies — such as the ongoing dialogue between the FCA and US regulators — will be an important step.
Reducing jurisdictional fragmentation gives cross-border businesses the certainty needed to operate across key markets.
And finally, practical integration: progress will be measured by how effectively stablecoins and tokenised deposits integrate into mainstream payment channels.
When regulated businesses can move funds globally using the most efficient rail available, without technical or regulatory friction, that will signal a mature and competitive market.
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FIS
Julia Demidova
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Image: OpenPayd 
