UK Lawmakers Urge Chancellor to Revise Stablecoin Regulations, Warning of Potential Flight to Dollar-Based Digital Assets

Cross-Party Coalition Raises Alarm Over BOE’s Restrictive Framework as Global Stablecoin Market Surges

In an unprecedented show of cross-party unity, a coalition of prominent UK lawmakers has formally appealed to Chancellor Rachel Reeves to intervene in Britain’s developing regulatory framework for stablecoins, expressing urgent concerns that the Bank of England’s current proposals could seriously undermine the UK’s competitive position in the rapidly evolving digital asset landscape. The parliamentary intervention reflects growing anxiety that overly cautious regulation might push innovation and capital toward more accommodating jurisdictions, potentially eroding London’s historic status as a global financial hub.

The December 11, 2025 letter—signed by influential political figures including Sir Gavin Williamson, Viscount Camrose, and Baroness Verma—emphasizes that stablecoins have evolved beyond niche financial instruments to become fundamental components of the emerging digital economy. These digital tokens, designed to maintain stable value by pegging to established currencies like the pound or dollar, are increasingly recognized as transformative financial tools with the potential to dramatically reduce transaction costs, accelerate settlement times, and expand financial access to underserved populations. The lawmakers paint a picture of a financial innovation at a critical juncture, one that the UK risks mishandling through excessive regulatory caution.

“Stablecoins are fundamentally reshaping financial infrastructure,” the lawmakers stated in their appeal, backing their urgency with compelling market data. They noted that stablecoin transactions reached an astonishing $27.6 trillion in 2024, exceeding the combined transaction volume of global payment giants Visa and Mastercard by nearly 8%—a statistic that underscores the remarkable mainstream adoption of these digital assets. Further emphasizing the trajectory of growth, the letter cited Citibank projections suggesting this figure could surpass $100 trillion by 2030, representing one of the most significant shifts in global financial infrastructure in decades. This explosive growth trajectory places additional pressure on regulators to develop frameworks that balance prudential oversight with the need to foster innovation.

Bank of England’s Proposed Restrictions Risk Creating “Two-Tier” Digital Asset Market

The core of the lawmakers’ concern lies in specific elements of the Bank of England’s draft regulatory framework, which they argue imposes unnecessary and potentially damaging restrictions on the development and adoption of pound-backed stablecoins. The current proposal restricts stablecoin use in wholesale markets, prohibits interest payments on reserves backing these digital assets, and imposes a relatively low cap of £20,000 on individual holdings. The letter argues these limitations could severely hamper the competitiveness of pound-backed stablecoins in the global market, effectively rendering them “unattractive” compared to dollar-pegged alternatives like USD Coin (USDC) and Tether (USDT)—both of which operate beyond UK regulatory jurisdiction.

This regulatory disparity creates what the lawmakers describe as a potentially dangerous scenario: “The outcome would be a flight from pound-backed digital assets to dollar-based ones, creating a two-tier market in which most on-chain activity is denominated and settled in U.S. dollars.” Such a development could inadvertently strengthen the dollar’s dominance in digital finance while marginalizing the pound in next-generation financial systems. Financial analysts suggest this could have far-reaching implications for the UK’s monetary sovereignty and the City of London’s global influence. The situation is particularly concerning given the growing integration of stablecoins into mainstream payment systems, cross-border transactions, and decentralized finance applications—areas where first-mover advantage and network effects play crucial roles in determining long-term market leadership.

The parliamentary intervention comes against a backdrop of increasing regulatory clarity in competing jurisdictions, most notably the United States, where the GENIUS Act represents a comprehensive attempt to establish clear guidelines for digital asset innovation and adoption. This contrast in regulatory approaches has heightened anxiety among UK financial technology stakeholders that Britain’s traditional leadership in fintech innovation and capital market dynamics could be progressively eroded through regulatory hesitation. Industry observers note that several major stablecoin projects have already begun shifting development resources away from London toward more receptive regulatory environments, including Switzerland, Singapore, and certain U.S. states with progressive digital asset frameworks.

Calls for Forward-Looking Framework to Secure UK’s Position in Digital Finance Revolution

The lawmakers’ appeal concludes with a direct call for Chancellor Reeves to demonstrate leadership by intervening to ensure the UK establishes a regulatory framework that balances prudential concerns with the imperative to remain competitive in the rapidly evolving digital asset ecosystem. “We welcome your commitment to ‘making the UK a world-leading destination for digital assets.’ Now is the time to deliver on this ambition. We urge you to intervene,” the letter stated, emphasizing that a forward-looking approach to stablecoin regulation would secure international investment, support high-value fintech growth, and reinforce the UK’s position as a global innovation hub.

Financial technology experts suggest the letter represents more than typical political posturing—it reflects genuine concern across the political spectrum that the UK could miss a pivotal moment in financial evolution. Dr. Eleanor Harrington, Director of Financial Innovation Studies at Imperial College London, noted in a recent analysis: “What we’re witnessing isn’t merely the emergence of new financial instruments, but potentially the fundamental rewiring of global payment and settlement infrastructure. Regulatory frameworks established now will likely determine which financial centers lead this transition and which follow.” The cross-party nature of the appeal underscores the recognition that digital asset regulation transcends traditional political divides, representing a national economic interest rather than a partisan issue.

The Treasury has yet to issue a formal response to the lawmakers’ letter, though sources close to the Chancellor indicate that a comprehensive review of the Bank of England’s proposed framework is already underway. Meanwhile, industry stakeholders are watching developments closely, with several major financial institutions reportedly preparing contingency plans should the UK adopt what they consider an overly restrictive approach. The Financial Conduct Authority has indicated it will hold additional consultations with industry participants before finalizing any regulatory framework, suggesting there remains opportunity for adjustment based on market feedback and international developments.

As global stablecoin adoption accelerates and institutional integration deepens, the UK faces a defining moment in its approach to digital finance innovation. The lawmakers’ intervention highlights the delicate balance regulators must strike: establishing sufficient safeguards to protect consumers and financial stability while creating an environment where innovation can flourish. How Chancellor Reeves responds to this challenge may significantly influence not only the future of digital assets in Britain but also the City of London’s positioning in the increasingly digital global financial landscape. With competing jurisdictions moving quickly to establish themselves as digital asset hubs, the pressure on UK policymakers to deliver a balanced, innovation-friendly framework has never been greater.