Britain could become a global leader in the future of digital finance but risks being left behind by “complex and unworkable” regulation, The Payments Association (TPA) has warned.

TPA, the UK’s leading trade body for the payments sector, hosts its annual PAY360 event in London this month, attended by thousands of business leaders, regulators and policy makers.

This week the Bank of England suggested it was “open” to a less strict regulatory regime for stablecoins to encourage greater investment in the UK market.   TPA gave a cautious welcome to the shift in the Bank’s tone, but warned its existing proposals were holding Britain back and called for swift change.  

It warned the BoE needed to act quickly on adopting a more flexible framework or risk Britain being left behind the US, the European Union and Gulf states in a rapidly expanding stablecoins market worth £210bn in 2025 and set to be worth upwards of £1.42tn by 2030.¹ 

Stablecoins are digital tokens pegged to traditional currencies like the pound, dollar and euro, which are transferable peer-to-peer.  They offer faster and cheaper transactions and improved financial inclusion by offering access to digital payments for under-served, under-banked or high inflation regions.  

Previously, Bank of England governor Andrew Bailey has said he would “need a lot of convincing” about the case for stablecoins but has U-turned and late last year said it “would be wrong to be against stablecoins as a matter of principle”.

Deputy governor Sarah Breeden went further this week, hinting that the Bank’s current strict cap on holding limits for investors could be raised.  

The Payments Association criticised the current cap - of £20,000 for individuals and £10m for businesses – as stifling innovation.  By comparison, MiCA, the European Union legislation for crypto and stablecoins, does not impose holding limits on individuals or businesses. 

In a further blow to UK opportunities, the EU’s limits under  MiCA (limits of €100M in stablecoins issued per day or 1M transactions per day) only apply to non-euro-denominated stablecoins, creating clear-cut advantage for euro-pegged stablecoins over other currencies. 

The Payments Association said time was running out for the BoE to make the changes the UK market needed to succeed. 

Riccardo Tordera-Ricchi, Vice President for Policy & Government Relations at The Payments Association, said: “We would welcome the Bank of England listening to industry, which would be a game changer - we hope this shift will be reflected when their framework is published in June.  We want a real multi-moneyverse where consumers can benefit from the efficiency and financial inclusion opportunities stablecoins offer.  Current BoE regulatory proposals will not deliver a competitive framework for stablecoins, and this will ultimately condemn Britain to become a fly-over zone to investors and innovators, damage our already low-growth economy, and weaken the overall attractiveness of the UK as the second global financial centre after New York". 

In its manifesto, ‘Making Britain a Payments Powerhouse’, published last month, TPA said it supported the UK Government and regulators' goal of building “a safe and effective regime for stablecoins”.

However, it added the proposed framework should be “supporting innovation, not stifling it”.

TPA has called for a regulatory framework that aligns with other benchmark models, particularly the US GENIUS Act.   It also wants UK authorities to remove barriers to digital currency adoption in the UK and promote the value of stablecoins, such as faster, cheaper cross-border payments and improving digital payrolls.

The manifesto concludes:  “Our message is clear: if we do not act swiftly and coherently, capital, innovation and skilled talent will flow elsewhere.  We must deliver a regulatory framework that protects consumers and the financial system, without locking the UK out of the digital finance economy.”

The Payments Association also submitted written evidence to the House of Lords Financial Services Regulation Committee's inquiry on the growth and proposed regulation for stablecoins.  It highlighted significant risks to Government growth and inclusion priorities if the UK misses out on the opportunities offered by stablecoins, and diminished power for the pound if Britain leaves the digital currency market to be dominated by a combination of US dollar-denominated stablecoins and China's central bank digital currency (the so-called “e-CNY”). 

TPA praised the Financial Conduct Authority (FCA)  for its recent admission of 4 British firms (including TPA member Revolut) to their stablecoins sandbox, but warned that without a competitive regime for systemic stablecoins from the Bank of England, it is very unlikely global stablecoin issuers will choose the UK as a place to scale.