Banking, fintech and crypto leaders warn the UK risks falling behind global payments innovation as regulators continue to block bank-issued stablecoins, leaving sterling absent from emerging digital currency flows.
The UK risks being sidelined in the next phase of digital payments innovation unless banks are allowed to issue stablecoins, according to senior figures from across banking, fintech and crypto, speaking at City & Financial Global’s Payment Regulation Conference.
Panellists warned that while the UK continues to develop its cryptoasset regulatory framework, the absence of a regime allowing bank-issued stablecoins is creating a growing gap with other jurisdictions, particularly the EU, where regulated banks are already permitted to issue their own tokens.
Emma Hagan, UK CEO of ClearBank, said the lack of parity risks excluding the UK from emerging global payment flows. “There is no bank issuance stablecoin regime,” Hagan says.
“A bank is not allowed to issue a stablecoin in the UK… that doesn’t exist in the UK, and that is a missed opportunity.” She adds that the consequences extend beyond innovation policy into economic competitiveness.
“We risk, I think, from an economy and ecosystem, being cut out of global trade if we don’t have it there.”
Dollar dominance and the absence of sterling
The warning came amid repeated references to the dominance of US dollar-backed stablecoins in global markets. Panellists noted the overwhelming majority of stablecoin volume today is denominated in dollars, with limited traction for euro or other currency alternatives.
Hagan pointed to the absence of a sterling-backed stablecoin as a strategic weakness. “There’s a reason why there is a huge amount of interest in USDC,” she says. “There isn’t… there’s no GBP coin.”
Without a domestic alternative, panellists argue, UK firms risk becoming dependent on foreign-denominated digital money for cross-border settlement, reinforcing dollarisation rather than reducing it.
Tokenised deposits are not a substitute
While UK regulators have prioritised tokenised deposits as a safer entry point for banks into digital money, panellists were clear that tokenisation alone does not solve the problem.
Hagan acknowledged that tokenised deposits have a role, particularly for institutions constrained by legacy infrastructure, but said they do not offer the same functionality as stablecoins, especially in cross-border use cases.
“It isn’t the same thing,” she says. “There isn’t the same opportunity, particularly in cross-border, because you still need to move the money.”
Jannah Patchay, Executive in Residence at Global Digital Finance, reinforces the distinction, arguing tokenised representations of existing bank money remain limited by the infrastructure they sit on.
“If the tokenised deposit is just a representation of the existing underlying infrastructure, then it’s ultimately constrained in the functionality and in the innovative capability that it can offer,” she says.
By contrast, Patchay said stablecoins and certain digital-native structures enable a wider range of programmable and cross-border use cases.
Regulatory complexity and licensing friction
From a legal perspective, Caner Sevinc, Senior Counsel at Gemini, highlighted the growing complexity facing firms seeking to integrate digital currencies into payments.
“The more and more integration, the more and more regulations being relevant to firms,” Sevinc says, pointing to the need for dual licensing as both payment institutions and cryptoasset firms.
He notes that while Europe has pushed towards formalising dual licensing requirements, significant uncertainty remains in the UK around the categorisation and treatment of stablecoins.
“There are still categorisation issues with stablecoins,” he says, adding that clarity on UK-issued versus non-UK-issued tokens will be critical to achieving “proportionality and principle-based regulation”.
Trust, confusion and consumer risk
Beyond institutional use cases, panellists repeatedly returned to the issue of trust, particularly for retail and SME users navigating an increasingly fragmented money landscape.
Austin Elwood, Digital Assets Industry Lead at NatWest, cited FCA research showing widespread misunderstanding of consumer protections. “43% of customers thought that a Bitcoin investment was covered by FSCS,” he says. “That’s really challenging.”
Elwood argues the proliferation of different forms of digital money risks undermining confidence unless regulation delivers clarity and consistency.
“Ultimately, I think the money is about trust,” he says. “How do we encourage trust in these new forms of money that will come across?”
Real-world use cases already emerging
Despite the challenges, panellists stressed that digital currencies are already solving real problems in specific contexts, particularly in cross-border payments.
Sevinc points to remittances as a clear example. “Try sending £2,000 to Turkey,” he says. “Making a stablecoin payment and ramping up in Turkey is faster and in most cases cheaper.”
However, he notes remittance remains a relatively small share of stablecoin usage, which is still dominated by trading and settlement in US dollars. “We have to accept that stablecoins are still dominantly used for trading,” Sevinc says.
Not either-or, but a strategic choice
The panel closed with discussion of whether improved traditional rails could ultimately remove the need for stablecoins, particularly if G20 ambitions for faster cross-border bank payments are realised.
Patchay rejects the idea that the two approaches are mutually exclusive. “It’s not an either or,” she says. “It’s not that one must die for the other to live.”
Instead, she argues that stablecoins are already filling gaps left by correspondent banking, particularly in emerging markets, and may continue to do so even as banks modernise.
For the UK, panellists suggested, the challenge is whether the regulatory framework will allow domestic institutions to participate fully, or leave the system running increasingly on foreign-issued digital money.
