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\t\tStablecoin is another clash in the books for Reeves and Bailey. (Image PA)\t<\/p>\n
A Rachel Reeves and Bank of England clash risks derailing Britain\u2019s stablecoin dream as the country plays catchup in the over \u00a3200 market<\/a>.<\/p>\n The Chancellor referenced plans to drive forward \u201cdevelopments in blockchain technology including\u2026 stablecoin\u201d in her 2025 Mansion House<\/a> speech.<\/p>\n But Reeves faces an obstacle to push her plans in the form of the Bank of England.<\/a><\/p>\n The central bank has been criticised for its \u201cprescriptive\u201d rules that risk \u201ckilling\u201d London\u2019s potential to become a global hub for stablecoins.<\/a><\/p>\n The bank\u2019s governor Andrew Bailey told MPs he would \u201cquestion\u201d the need \u201cto introduce a new form of money\u201d.<\/p>\n Whilst he has not directly rejected stablecoins he said in a Treasury Select Committee hearing he would need \u201ca lot of convincing that the use case was made\u201d.<\/p>\n But it\u2019s not the first area to divide the Chancellor and the central bank governor.<\/p>\n Reeves and Bailey must align <\/p>\n Bailey was reported to have blocked a meeting<\/a> between fintech giant Revolut and banking regulators which Reeves had set up.<\/p>\n The governor also distanced himself from Reeves\u2019 comments that regulators were a \u201cboot on the neck\u201d of businesses.\u00a0<\/p>\n Yet another area of friction was revealed after Bailey cautioned the removal of the bank\u2019s ring-fencing regime would have a \u201cnegative effect on UK lending\u201d. But despite warnings Reeves pressed ahead, confirming reformation plans at Mansion House.<\/a><\/p>\n But the Treasury and Bank of England have faced calls to align on stablecoin to ensure Britain does not completely miss the boat.<\/p>\n Fintech industry body UK Finance warned the UK\u2019s chances of strengthening its position in the emerging industry was being thwarted by the central bank\u2019s policy over holding limits and asset-backing requirements.<\/p>\n The body urged the bank to \u201cpublicly walk back\u201d from the proposals and end its \u201cbias towards incumbents and legacy systems\u201d.<\/p>\n Kunal Jhanji, partner at Boston Consulting Group and global lead<\/a> for payments infrastructure, told City AM <\/strong>\u201cclarity of communication\u201d and \u201cclarity of messaging is vital\u201d.<\/p>\n He called for alignment across stakeholders \u2013 from government to regulation.<\/p>\n \u201cEveryone needs to sing from the same hymn sheet \u2013 one way or the other, it is for them to make up their mind.\u201d<\/p>\n The <\/strong>stablecoin <\/strong>wave<\/p>\n Over the last year, stablecoins have sprung into mainstream conversation amid surging demand.<\/p>\n 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.<\/p>\n Stablecoins, which are cryptocurrencies pegged to a stable asset like the US dollar, have swung into favour providing clarity among volatile crypto markets.<\/a><\/p>\n Ben Lee, partner at Web3 & Disruptive Technology, told City AM<\/strong> global economic turbulence had led to investors seeking out \u201cdollar-denominated assets that are more accessible than traditional banking products\u201d.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tDemand for City lawyers surges amid motor finance scandal<\/a><\/p>\n \u201cStablecoins\u2026provide a fast, borderless, and censorship-resistant alternative to fiat banking rails (traditional financial infrastructure), especially in regions with volatile currencies or limited financial infrastructure.\u201d<\/p>\n BCG analysis found stablecoin transaction volumes topped $26.1tn in 2024.<\/p>\n This came as legacy institutions began to enter the scene.<\/p>\n US banking juggernaut JP Morgan has been a market pioneer with the launch of its own private blockchain platform \u201cJPM Coin\u201d for institutional clients, despite CEO Jamie Dimon\u2019s previous excoriating remarks about cryptocurrencies, dismissing Bitcoin as \u201cworthless\u201d.<\/p>\n 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 \u201caccelerate mainstream stablecoin adoption\u201d.<\/p>\n But a lack of alignment in the UK risks stablecoin ambitions being crushed.<\/p>\n Jhanji said: \u201cWe know where the chips have landed. We need to create a good hybrid, regulatory framework that allows us to play to our advantages\u201d.<\/p>\n Lacking regulation<\/p>\n One crucial area analysts say the UK is missing the mark is regulation<\/a>.<\/p>\n Zoe Wyatt, partner and head of Web3 & Disruptive Technology told City AM<\/strong>: \u201cRegulation remains a defining factor in stablecoin growth, and the UK currently lags behind the EU and US in implementation.\u201d<\/p>\n Whilst offering two distinct alternatives to stablecoin progress both the US\u2019 Genius Act and EU\u2019s MiCA represented significant milestones in the regulation of stablecoins.<\/p>\n 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.<\/p>\n Meanwhile, the Genius Act served as a targeted US federal law that focuses specifically on dollar-pegged \u201cpayment stablecoins,\u201d helping strengthen the currency\u2019s position in the digital economy through providing an attractive framework for innovation.<\/p>\n Jhanji said: \u201cNone of this is theoretical anymore\u2026There is regulation backing it up, there is desire of the governments.\u201d<\/p>\n He added the clarity of how stablecoin plays in the mainstream financial markets<\/a> is what \u201ctriggers a massive flurry of activity\u201d.<\/p>\n Wyatt said: \u201cThis regulatory hesitation risks undermining the UK\u2019s ambitions to be a global crypto hub, especially as institutional and retail users seek clarity and confidence in compliant stablecoin models.\u201d<\/p>\n What Britain does next<\/p>\n The City watchdog is set to publish its final rules on stablecoin regulation in 2026<\/a> following consultation.<\/p>\n Jhanji said in order for the UK to capture a slice of the stablecoin wave it must move with \u201crelentless\u201d speed in \u201cpolicy or regulatory changes\u201d.<\/p>\n