Thank you to Oliver Woodhouse, Senior Associate at Ashfords for providing us with this guest blog as part of their editorial month.
The UK is entering an exciting stage in shaping how cryptoassets and stablecoins will operate in its financial system – we’re now moving beyond policy discussion and consultation and towards effective implementation with regulatory oversight and industry backing.
These are no longer fringe technologies and rather represent important future components of financial infrastructure, nationally and internationally. In the UK, we’re now deep in regulatory standard setting and moving into an execution phase which signals great opportunities for the sector and growth.
This article explores how the UK is moving from policy to practice in the cryptoasset and stablecoin space, what this means for financial services, and the opportunities these technologies create for businesses and consumers alike.
The UK ambition
The UK is a global leader in fintech, so it’s clear there’s ambition to drive responsible innovation in the cryptoasset and stablecoin space.
HM Treasury, the Financial Conduct Authority (FCA) and the Bank of England are building a future regulatory regime that enables real world use cases for these technologies, supports consumer protection and financial education, all whilst working to maintain market integrity and necessary regulatory oversight and supervision.
This, coupled with the wealth of fintech talent in the UK, the vast scale and history associated with our financial services sector, and globally respected law and regulation, should result in an effective regulatory framework to help unlock investment, drive innovation and increase adoption of these technologies.
Cryptoassets and stablecoins
Before we dive deeper, what do we mean? Cryptoassets and stablecoins are regularly grouped together but each have some distinct characteristics.
Cryptoassets are digital representations of value or rights which can be transferred and stored electronically using distributed ledger technology, blockchain – as the UK legal and regulatory regime takes effect ‘qualifying cryptoassets’ will fall within the future regulatory regime.
Stablecoins are a type of cryptoasset designed to maintain a stable value, usually linked to a currency like £GBP or $USD backed with reserve assets and designed for payments. Stablecoins could have value linked to other assets too. Similarly ‘qualifying stablecoins’ will fall within the UK future regulatory regime, with greater regulatory oversight for those deemed ‘systemic’.
The opportunity – distinct but well connected markets?
Cryptoassets and stablecoins have existed for a long time, so what’s different now? We’d say a lot!
Over the past few years we’ve seen significant maturity of the industry and greater acceptance of the benefits and use cases these technologies can bring to financial services, there’s also been significant investments from more ‘traditional’ financial service firms into fintechs building cryptoasset and stablecoin native propositions.
This, coupled with a future effective regulatory regime in the UK, will give firms building these tools greater comfort to scale in the UK and give service users greater confidence that firms can be held to account with appropriate regulatory oversight.
All this sets the stage for innovative use cases linked to these technologies, for example:
- Cryptoassets enabling effective asset tokenisation creating digital forms of traditional assets (like tokenised bonds and funds), fractional ownership of assets (like tokenised real estate, art or debt) and more effective platforms for digital rights management (like IP licensing or royalty streams linked to music, film and other creative works).
- Stablecoins promise lies firmly in the payments space, increasing liquidity and enabling quicker, cheaper, movement or management of funds – imagine real-time settlement of supplier or payroll payments and cross-border transactions, or programmable finance for payments and treasury operations linked to smart-contracts and perimeters set by businesses or consumers.
UK regulation – the direction of travel?
2026 will be a revolutionary year for UK cryptoasset and stablecoin regulation. The UK regulators are developing a broad regime to support effective regulation and oversight of firms operating in the sector, although with some differing requirements tailored to cryptoassets and stablecoins given their use cases as mentioned above.
The aim is to pull a variety of activities relating to cryptoassets and stablecoins into scope of the UK’s regulated activities regime which would be subject to FCA oversight; for example:
- Arranging deals in qualifying cryptoassets
- Dealing in cryptoassets as principal or as agent
- Issuing qualifying stablecoins in the UK
- Operating a qualifying cryptoasset trading platform
- Qualifying cryptoasset staking
- Safeguarding qualifying cryptoassets
These types of activities and assets would also be subject to other FCA rules and standards, like:
- The financial promotions regime regarding marketing and communications
- Market abuse and transparency rules relevant to these types of assets
- Regulatory reporting requirements
- Specific capital resource and liquidity requirements
- Requirements related to operational standards, governance and risk management processes
This may sound a lot to some, however, regulation is clearly a positive step and the correct direction of travel for the sector, in the UK and globally. It may in the short term create hurdles but regulation shouldn’t be seen as a ‘blocker’, particularly with the increasingly ‘tech positive’ approach of UK regulators, recognising effective use of technology can support economic growth and continued innovation in financial services.
The road ahead – what to expect in the coming years?
It’s clear the dial will move in the UK, from potential and preparation, to effective implementation and well adopted use cases. In the years ahead, we’d expect to see:
- FCA-approved £GBP stablecoins in wider circulation, both for use in retail and wholesale scenarios. This is an important step in maintaining financial sovereignty in a currently $USD dominated stablecoin market.
- Tokenised financial instruments, like bonds, funds and real estate products are becoming more mainstream, moving beyond the pilot projects and initiatives currently taking place.
- Closer collaboration between international regulators to determine what ‘good’ looks like for cryptoasset and stablecoin frameworks, as the sector continues to scale, technology advances and more service providers enter the market to compete (or complement) existing financial service infrastructure and products.
- More partnerships between banks, payment service providers and other financial service firms with providers of cryptoasset and stablecoin services, as businesses develop and refine their digital asset strategies. In the longer term, this could lead to strategic investment, acquisition or non-cryptoasset and stablecoin firms entering the space directly.
- A fight for talent within the sector, as firms compete for niche expertise and industry experience in areas like compliance, legal, finance and operations. The UK’s reputation as a fintech leader will support this however.
- Increased consumer and business confidence and education in benefits cryptoassets and stablecoins can bring to day-to-day activities or commercial operations, balanced with raising profile of risks and challenges.
The direction of travel is clear, a high standard regulatory framework in the UK will support an effective operational transition to a more digital first world of financial services, leveraging cryptoasset and stablecoin technologies to create new opportunities and test innovative use cases for more sophisticated and accessible financial services across most areas of the market.
For further information please contact Oliver Woodhouse, Ashfords’ financial services regulatory practice lead.
