The UK will begin consultations on stablecoin regulations on November 10th, with the aim of implementing regulations by the end of 2026, in line with US regulatory trends. The move comes as the country’s cryptocurrency user base has soared to 7 million, up 204% from 2.3 million four years ago.
Major stablecoin issuers such as Circle, Tether and PayPal are poised to enter the regulated UK market.
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UK accelerates stablecoin framework amid US competition
The UK government has confirmed plans to introduce comprehensive stablecoin regulation following the passage of the US GENIUS Act. The Bank of England plans to require stablecoin issuers to hold reserves in government bonds and short-term securities, people familiar with the matter said. The Financial Conduct Authority (FCA) has published a crypto asset roadmap outlining a phased introduction approach by 2026.
The consultation process will gather industry feedback on reserve requirements, audit procedures and transparency standards. Stablecoin issuance in the UK has increased by 40% year-on-year, showing that the market is gaining momentum ahead of the introduction of regulations. The framework aims to balance innovation protection and consumer protection as the country establishes itself as a competitive jurisdiction for digital asset businesses.
The UK’s 7 million crypto holders represent a substantial addressable market for regulated stablecoin services. Streamlining cross-border payments and integrating them with traditional financial infrastructure remains a key priority for both regulators and market participants as the consultation period begins.
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Institutional investors focus on entering UK market
Circle has already secured both EURC and USDC licenses in France under the EU’s MiCA regulations and is poised for broader European expansion. Tether’s USDT maintains dominant global market share, but regulatory scrutiny regarding reserve transparency and auditing practices has increased.
PayPal’s PYUSD stablecoin has a market capitalization of $2.8 billion and has expanded into the Stellar network covering 170 countries. The company’s “Pay with Crypto” feature supports over 200,000 merchants who accept payments for digital assets via instant conversion from stablecoins to fiat currencies. Traditional payment providers, including Western Union, are also considering offering stablecoins as regulations become clearer.
The convergence of regulatory frameworks across the US, UK and EU creates opportunities for standardized compliance approaches. Asset managers are closely monitoring the UK talks, as the Bank of England’s reserve requirements have a direct impact on institutional capital inflows into stablecoin-backed assets.
Market impact and reserve requirements
The Bank of England’s obligations on government bonds or short-term securities as reserve assets establish quality standards for the backing of stablecoins. This requirement impacts asset managers who act as custodians of stablecoin reserves, creating new business opportunities within traditional finance. This approach mirrors the proposals of the US GENIUS Act and promotes regulatory harmonization across borders.
Technical implementation challenges remain, particularly regarding real-time reserve verification and audit mechanisms. Industry observers say regulatory clarity should encourage institutional adoption while mitigating risks similar to past issuance mistakes by other providers. Given London’s status as a financial centre, the UK framework has the potential to influence global standards.
The 2026 implementation schedule provides market participants time to prepare while remaining competitive against other jurisdictions. Financial institutions are expected to provide detailed feedback during the consultation period to shape the final regulatory requirements, which balance innovation and system stability.
