Wednesday 13 August 2025 6:00 am
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Tuesday 12 August 2025 4:36 pm
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Stablecoin is another clash in the books for Reeves and Bailey. (Image PA)
A Rachel Reeves and Bank of England clash risks derailing Britain’s stablecoin dream as the country plays catchup in the over £200 market.
The Chancellor referenced plans to drive forward “developments in blockchain technology including… stablecoin” in her 2025 Mansion House speech.
But Reeves faces an obstacle to push her plans in the form of the Bank of England.
The central bank has been criticised for its “prescriptive” rules that risk “killing” London’s potential to become a global hub for stablecoins.
The bank’s governor Andrew Bailey told MPs he would “question” the need “to introduce a new form of money”.
Whilst he has not directly rejected stablecoins he said in a Treasury Select Committee hearing he would need “a lot of convincing that the use case was made”.
But it’s not the first area to divide the Chancellor and the central bank governor.
Reeves and Bailey must align
Bailey was reported to have blocked a meeting between fintech giant Revolut and banking regulators which Reeves had set up.
The governor also distanced himself from Reeves’ comments that regulators were a “boot on the neck” of businesses.
Yet another area of friction was revealed after Bailey cautioned the removal of the bank’s ring-fencing regime would have a “negative effect on UK lending”. But despite warnings Reeves pressed ahead, confirming reformation plans at Mansion House.
But the Treasury and Bank of England have faced calls to align on stablecoin to ensure Britain does not completely miss the boat.
Fintech industry body UK Finance warned the UK’s chances of strengthening its position in the emerging industry was being thwarted by the central bank’s policy over holding limits and asset-backing requirements.
The body urged the bank to “publicly walk back” from the proposals and end its “bias towards incumbents and legacy systems”.
Kunal Jhanji, partner at Boston Consulting Group and global lead for payments infrastructure, told City AM “clarity of communication” and “clarity of messaging is vital”.
He called for alignment across stakeholders – from government to regulation.
“Everyone needs to sing from the same hymn sheet – one way or the other, it is for them to make up their mind.”
The stablecoin wave
Over the last year, stablecoins have sprung into mainstream conversation amid surging demand.
BCG data shows stablecoins total market cap grew 57 per cent in 2024 to $210bn in 2024. In just 2025 so far, its market size has expanded 30 per cent to $270bn.
Stablecoins, which are cryptocurrencies pegged to a stable asset like the US dollar, have swung into favour providing clarity among volatile crypto markets.
Ben Lee, partner at Web3 & Disruptive Technology, told City AM global economic turbulence had led to investors seeking out “dollar-denominated assets that are more accessible than traditional banking products”.
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“Stablecoins…provide a fast, borderless, and censorship-resistant alternative to fiat banking rails (traditional financial infrastructure), especially in regions with volatile currencies or limited financial infrastructure.”
BCG analysis found stablecoin transaction volumes topped $26.1tn in 2024.
This came as legacy institutions began to enter the scene.
US banking juggernaut JP Morgan has been a market pioneer with the launch of its own private blockchain platform “JPM Coin” for institutional clients, despite CEO Jamie Dimon’s previous excoriating remarks about cryptocurrencies, dismissing Bitcoin as “worthless”.
Global payments giants Visa and Mastercard have also partnered with established stablecoin issuers in a bid to integrate the new tech into their systems. Mastercard announced a landmark partnership with fintech Fiserv in June to “accelerate mainstream stablecoin adoption”.
But a lack of alignment in the UK risks stablecoin ambitions being crushed.
Jhanji said: “We know where the chips have landed. We need to create a good hybrid, regulatory framework that allows us to play to our advantages”.
Lacking regulation
One crucial area analysts say the UK is missing the mark is regulation.
Zoe Wyatt, partner and head of Web3 & Disruptive Technology told City AM: “Regulation remains a defining factor in stablecoin growth, and the UK currently lags behind the EU and US in implementation.”
Whilst offering two distinct alternatives to stablecoin progress both the US’ Genius Act and EU’s MiCA represented significant milestones in the regulation of stablecoins.
MiCA established a single rule book for the 27-state bloc and mandated that issuers be licensed and hold an equal amount of reliable assets, like dollars or government bonds, for every stablecoin issued.
Meanwhile, the Genius Act served as a targeted US federal law that focuses specifically on dollar-pegged “payment stablecoins,” helping strengthen the currency’s position in the digital economy through providing an attractive framework for innovation.
Jhanji said: “None of this is theoretical anymore…There is regulation backing it up, there is desire of the governments.”
He added the clarity of how stablecoin plays in the mainstream financial markets is what “triggers a massive flurry of activity”.
Wyatt said: “This regulatory hesitation risks undermining the UK’s ambitions to be a global crypto hub, especially as institutional and retail users seek clarity and confidence in compliant stablecoin models.”
What Britain does next
The City watchdog is set to publish its final rules on stablecoin regulation in 2026 following consultation.
Jhanji said in order for the UK to capture a slice of the stablecoin wave it must move with “relentless” speed in “policy or regulatory changes”.
It comes as the government presses forward with its National Payments Vision, with hopes the “innovation, efficiency and economic benefit” of developments could be “potentially transformational”.
Reeves may have told fintech bigwigs earlier this year she would make the UK a “world-leader” in digital assets but first she will need the Bank of England on board in order to just play catch up.
As Jhanji said: “We are not the first mover anyway. Now, we should be a smart, fast follower.”
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