The UK’s approach to stablecoins – is its fintech edge slipping away?

Alpesh Patel, Strategic Partnership Director at Cartex, shares his thoughts on the Bank of England’s proposed stablecoin framework and whether it stifles fintech competitiveness in favour of safety.

Every financial system strives to achieve a balance between two goals: the need to support what already works and the need to innovate, to build something that does not yet exist. 

In the UK, this balance appears to have shifted the goalpost to protecting its traditional financial system, considering the Bank of England’s (BoE) newly released proposal on the regulatory regime for sterling-denominated systemic stablecoins. According to the paper, stablecoin issuers can now hold up to 60% of their reserves in short-term UK government bonds. This contrasts with the progressive approach of the UAE or Singapore, where cryptocurrencies, particularly stablecoins, are way more integrated into everyday lives. While this cautious approach might safeguard the UK’s financial system, a question arises: is it effective, or will it cost the country its fintech edge?

BoE’s regulatory framework – how is the UK positioning itself in the global stablecoin race?

A few years ago, in its 2023 discussion paper, the BoE suggested an even more conservative rule. The initial release obliged all backing assets for ‘systemic’ stablecoins to be held as central bank deposits, requiring a 100% reserve at the BoE. Technically, that would have made the tokens extremely safe and protected them from any kind of volatility, yet in practice, they would have been nearly impossible to issue in the UK. If all capital were to be locked in the central bank in the highly illiquid form of a deposit, then what is the economic benefit for the issuers? 

Over time, after consulting with payment providers, the BoE has realised that such a model, which does not imply yield, would freeze innovation before someone even tries it, and this triggered an update to the proposal. In the new framework released in November 2025, the BoE outlines a decision to lower the percentage of reserves to 60% and enable them to be held in short-term sterling-denominated UK government bonds instead of deposits. 

For me, this step is more of a carefully curated response to how other countries are moving ahead with their cryptocurrency rules. The BoE does not seem very enthusiastic about stablecoins, mainly because they could negatively impact the traditional financial system, pulling money away from regular banks. In a crisis, having stablecoins or other cryptocurrencies might even lead people to rush to withdraw their funds, hurting banks and making the UK less competitive by reducing the deposits.

The good news is that this updated document now allows at least some yield for stablecoin issuers. It is also strong on principles such as oversight and users’ safety. For example, besides requiring backing by secure assets, it places limits on stablecoin holding. This lowers the chance that stablecoin value will suddenly drop, which helps people feel more confident using them.

On the flipside, the scope is narrower than many expected. The paper focuses almost entirely on retail payments, with little space for the corporate and cross-border flows where stablecoins proved most useful. Some questions also remain unanswered. For instance, how will interest on reserves be handled? The BoE should be more unambiguous in its reforms; until every detail is clear, fintech companies cannot operate properly. 

As a result, the problem with the BoE’s proposition is its unclear nature, not overcautiousness. If it were more elaborated and better planned, I think the UK’s stablecoin approach could lead the race. When the UK moves from principles to operational rules on schedule, it could compete with the US and EU by offering certainty. However, if the rules remain vague, all talent and investment will go to countries that are precise in their reforms. 

Fintechs and stablecoins – how to navigate the current landscape

Even in uncertain and developing conditions like these, UK-based fintechs can take advantage of the situation. In practice, this means designing systems which enable instant redemption to fiat and which are stress-tested. It also means live monitoring of user and merchant balances against holding caps, as well as fully documented resilience for outages or even issuer failure. 

Credibility for fintechs will also come from behaving like a bank. That does not mean acting like an established financial institution; however, it does mean proving you can look after funds as a bank would – think aligning custody and safeguarding with FCA expectations, producing liquidity ladders, and preparing reporting. 

Even with the UK’s conservative approach, there is room for agility. For example, fintechs can test new ideas in controlled ‘sandbox’ trials to provide regulators such as the BoE with solid evidence on what to change. They could also make stablecoins easier to move between different providers, so users don’t have to rely on just one company.

In the end, the best advice for every company working with this framework is to stop sitting idly by, waiting for something better. Engage with the current system to the maximum, creating a trustworthy image, but anticipate the change and start building as though the future updates have arrived.

About the author

Alpesh Patel is a Strategic Partnership Director at Cartex, a new-gen fintech marketplace. He is a senior executive with over 25 years of experience in fintech, cryptocurrency, card issuing, and payments sectors in the UK and globally.

 

 

About Cartex

Cartex is a next-generation fintech marketplace uniting card issuing, card acquiring, cryptocurrency services, telecom payments, remittance, and risk management under one ecosystem. Founded in 2020 and headquartered in Cyprus, it connects businesses across Europe, Asia, the Middle East, and North America to financial infrastructure. By bridging telecoms and fintech, Cartex enables financial inclusion, drives global commerce, and delivers a future-ready platform designed for the digital economy.