The UK’s industry body for FinTech has created a blueprint to make the UK the leading international market for stablecoin.

In a new report from Innovate Finance, Stablecoin: The UK Opportunity, outlines how the UK can become the most attractive jurisdiction in the world for issuing and using stablecoins, while maintaining high standards of financial stability, transparency, and consumer protection.

Stablecoins – digital tokens backed by traditional currencies – are already a $200bn global market, and are expected to underpin major future innovations in payments, artificial intelligence, and financial infrastructure.

Due to their efficiency and cost saving, programmability and transparency benefits, Innovate Finance says that stablecoins are primed to revolutionise areas such as international payments and supply chain management all the way to consumer applications such as shopping and buying a house.

With its global financial footprint, deep FinTech ecosystem, and regulatory credibility, the UK is well positioned to lead – but must act quickly, the FinTech body says.

Key competitors have already pulled ahead, with both the US and EU having developed stablecoin regimes that are either live or on the cusp of being legislated.

Despite its slow progress, the UK has a unique opportunity to capitalise on the flexibility that Brexit offers and move ahead with a stablecoin regime that is more friendly towards innovation.

“Without decisive and urgent action, the UK risks missing a significant window of opportunity,” Janine Hirt, CEO of Innovate Finance, said.

“As the fourth most traded currency globally and home to nearly 40% of FX turnover, GBP is a natural anchor for global stablecoins. It’s not unrealistic to suggest the UK could capture 10–20% of this market.

“Despite other jurisdictions moving earlier, the UK has the advantage of learning from their gaps. This plan sets out a clear, comprehensive regime to ensure stablecoins support economic growth, unlock innovation in payments and AI, and cement the UK’s role as the global centre of digital finance.

“By acting now, the UK can position itself as the global centre for digital assets, and not only benefit from stablecoin as a drive of growth itself, but also as a key enabler of other digital markets.”

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The Framework

The report proposes four key building blocks for a world-leading UK stablecoin regime.

1. GBP-backed stablecoins: The UK should back stablecoins with the British pound 1:1, while allowing issuers discretion to hold equivalent tokenised assets or over-collateralised reserves.
2. Building international channels: The UK stablecoin should be compatible and accessible to an international market – this means that stablecoins denominated in other currencies would be issued freely in the UK, and UK-regulated firms could issue multi-currency stablecoins.
3. Commercial incentives: Issuers should be allowed to offer yield or interest to customers which whom they have a direct commercial relationship. Innovate Finance says this can be done without compromising the role of stablecoins as a payment instrument or exposing users to unnecessary risk.
4. Bespoke regulation: Rather than force stablecoins into frameworks designed for e-money or broader crypto assets, stablecoins should have a distinct category.

The report also outlines how stablecoins can deliver business growth and encourage innovation. Innovate Finance says that these can offer a boost to payments and are a critical part of AI infrastructure plans.