The Payments Association has published a report analysing stablecoin use cases across global financial infrastructure and the UK's competitive position, alongside a formal response to the Bank of England's consultation on systemic stablecoins.
The report, entitled Stablecoins across the payment stack: Applications, adoption and regulatory readiness, was produced by the association's Digital Currencies Working Group with contributions from Swift, Worldpay, OpenPayd, Clear Junction, Addleshaw Goddard, Travers Smith, and others.
The report identifies five primary areas where stablecoins are being deployed to address inefficiencies in traditional financial systems, including cross-border settlement, merchant payment costs, trade finance, tokenisation of real-world assets, and agentic commerce, where AI agents require high-frequency, low-value settlement rails. It notes that stablecoins offer the potential to reduce transaction costs by over 99% in certain cross-border scenarios and can automate complex trade finance workflows through smart contracts.
UK regulatory concerns and competitive risk
The association's formal response to the Bank of England consultation raises concern that the proposed framework may inadvertently hinder the development of a domestic stablecoin market. Specific areas of concern include a requirement for issuers to hold 40% of backing assets in unremunerated central bank deposits and holding limits of GBP 20,000 for individuals and GBP 10 million for businesses. The association argues these limits could discourage institutional adoption and send a restrictive signal to international market participants.
Furthermore, the industry is calling for a revision of backing asset requirements, suggesting an 80:20 split between government debt and central bank deposits to better support sustainable issuer business models. The report concludes that without a more flexible regulatory approach aligned with developments in the EU, Singapore, and the US, the UK risks losing investment in the next generation of digital financial services.
The report also highlights the dominance of US dollar-denominated stablecoins, which currently account for 99% of the global stablecoin market, as a structural challenge to the future international role of sterling.
Talking about the findings, Riccardo Tordera-Ricchi, Vice President of Policy and Government Relations at The Payments Association, noted that the current proposal falls short of providing an adequate foundation for a competitive and attractive stablecoin framework.
