With key frameworks still evolving and misaligned, financial institutions are reluctant to move ahead with digital money initiatives tied to sterling.
Continuing uncertainty surrounding stablecoin policy risks leaving the UK’s financial sector behind, according to Macs Dickinson, Director of Engineering at LHV Bank.
Speaking during a panel at Pay360, Dickinson argued the lack of clear progress in policy means it’s very hard to make significant investments in a GBP-pegged stablecoin.
“Right now, it wouldn’t make sense for us to invest in or build our own GBP stablecoin because we wouldn’t be able to ship it, and we don’t have the resources to say we’re going to build it and be ready once it goes live,” he said.
“This actually becomes a big question about the UK economy and whether or not we want London to still be the place that it is today in the global finance ecosystem. If we do, we need policy that unlocks innovation in the UK and, right now, there isn’t really a drive to do that.”
While the Financial Conduct Authority (FCA) is in the process of finalising a stablecoin regulatory framework, expected to take effect on 25 October 2027, the Bank of England (BoE) has also set out its own vision for hold limits for stablecoins on a retail and wholesale scale.
This lack of harmony between key financial organisations heightens concerns over how the two rule sets will interact and impact issuance and distribution choices as the technology develops.
Ollie Carew, Digital Asset Strategy Lead for Natwest, also pointed to examples of regulatory uncertainty leading to retail banks being forced to reimburse customers for digital asset trades made on other platforms that have turned out to be scams or have met performance expectations.
These risks, Carew continued, mean commercial banks are hesitant to embrace the digital asset ecosystem until there is sufficient sector-relevent policy in place.
Stablecoins for the everyman
Looking to the future, the panel also considered what digital money usage will look like for the everyday user as technology develops and regulations facilitate wider adoption.
For Carew, he envisions a unified ecosystem where a user can store their money, assets and documents. The consumer will then be able to ‘tokenise on demand’ when they believe they need that functionality.
Although the panelists acknowledged education is needed around digital money for the everyday user, Dickerson suggested the end goal should be for institutions to be able to provide a usable service that requires the same level of engagement as current payment systems.
“I’ve been asking myself for a while, how am I going to explain stable coins to my mum?” Dickinson told the audience.
“The conclusion I’ve come to is the same way that I explained the SWIFT network to her, I don’t, she doesn’t need to know. One doesn’t care if, when she’s making a payment, it’s going over the SWIFT network, or if it’s going over the MasterCard network or the Visa network. What matters to her is she can make a payment and it works.
“The goal here is that we need to be offering the same usability as SWIFT, as MasterCard, as visa, with stable coins. And once stable coins gets to that level of autonomy and it’s invisible, essentially, that’s when it’ll be ready for mass market.”
Programmable transactions
On a more commercial scale, the panelists also hailed the potential of digital money to enhance the scale of programmable transactions and avoid ‘trapped liquidity’ when working on a multinational scale.
Shreyosee Dutta-Ray, Director and Product Owner of Group Treasury Digital Assets for UBS, said: “With blockchain you can now make the movement of money much faster, much more traceable and much more transparent.
“If you have a multinational with a presence across the globe. Now it is possible for them to mobilise liquidity from one continent to another, irrespective of cutoff time so they don’t have to worry about trapped liquidity.
“From the client’s perspective, the aspect of programmability is great because now they can have their business logic encoded in customer contracts and their back office doesn’t have to sit all day or overnight to manage funds.”
Dickinson argued that the use cases of programmable transactions are not yet fully understood, and digital money has the potential to provide the ‘infrastructure for payments to be made in a better way’ and allow processes to become increasingly autonomous.
