The Payments Association has released a report examining the diverse applications of stablecoins within global financial networks and assessing the UK’s competitive positioning in this domain. The document also responds to the Bank of England’s public consultation on systemic stablecoins.
Titled Stablecoins across the payment stack: Applications, adoption and regulatory readiness, the study was developed by the association’s Digital Currencies Working Group in collaboration with Swift, Worldpay, OpenPayd, Clear Junction, Addleshaw Goddard, Travers Smith, and other contributors.
The report outlines five key areas where stablecoins are being utilized to tackle inefficiencies in conventional financial systems. These include cross-border transactions, merchant payment optimization, trade finance, the tokenization of real-world assets, and agentic commerce, where automated agents necessitate frequent, low-value settlement channels.
UK regulatory landscape and competitive threats
The association’s response to the Bank of England’s consultation expresses concerns that the proposed rules might inadvertently stifle the growth of a domestic stablecoin ecosystem. Key issues include the mandate for issuers to maintain 40% of their collateral in non-interest-bearing central bank deposits and individual holding limits set at GBP 20,000 and business limits at GBP 10 million.
Industry stakeholders argue that such restrictions could deter institutional adoption and signal a restrictive attitude to international players. The group advocates for more flexible backing asset requirements, suggesting an 80/20 split between government debt and central bank deposits to foster sustainable business models among issuers.
Without a regulatory framework that aligns with those adopted in the EU, Singapore, and the US, the UK risks falling behind in the development of advanced digital financial services. Additionally, the report emphasizes the dominance of U.S.-backed stablecoins, which currently hold 99% of the global market share, posing a significant challenge to sterling’s future role on an international scale.
In summary, Riccardo Tordera-Ricchi, Vice President of Policy and Government Relations at The Payments Association, stated that the current proposal fails to provide the necessary groundwork for a competitive and appealing stablecoin environment in the UK.
