Giving evidence to the House of Lords, Adam Jackson, chief strategy officer at Innovate Finance, outlined the critical growth opportunities and severe risks currently facing the UK stablecoin sector. In its formal submission, the industry body warned that under the current regulatory proposals put forward by the Bank of England, the UK will completely fail to launch a GBP stablecoin.
According to Innovate Finance, this regulatory failure could severely harm domestic economic growth, reduce broader productivity, and drastically increase the nation’s reliance on foreign currencies.
The looming threat of dollarisation
This mounting risk of foreign currency reliance has been dubbed ‘dollarisation’ by the industry body. During his session, Jackson highlighted the massive opportunities for a UK stablecoin industry to compete on the global stage, provide innovative services to UK businesses and markets, and firmly ensure a GBP presence within the wider global stablecoin ecosystem. However, he cautioned that the current regulatory trajectory actively undermines these national ambitions.
“The regulators’ proposals create the risk that: we will not have any GBP stablecoins; we will not have any global British stablecoin payments firms; US firms and the dollar will dominate,” Jackson stated.
He further stressed the chilling effect these proposals are already having on capital allocation. Jackson noted that the firms Innovate Finance works with simply would not invest in UK stablecoin services or products if the current proposals are officially introduced.
Breaking down the regulatory barriers
Innovate Finance specifically identified the top regulatory barriers created by the Bank of England’s current framework.
Chief among these concerns are the proposed holding limits for users. Although positioned by regulators as a mere “transitional measure,” Innovate Finance argues these limits will prove operationally complex and extremely expensive to implement. The body asserts that absolutely no one will invest in GBP stablecoins while these strict holding limits remain in force.
Furthermore, the stringent requirements surrounding backing assets are causing deep industry concern. The current mandate requires 40 per cent of a stablecoin’s backing assets to be held as unremunerated Bank of England deposits. According to Innovate Finance, this heavy requirement essentially renders existing stablecoin business models entirely unviable and globally uncompetitive.
Finally, the industry body pointed to the restrictive stance on institutional issuers. Jackson highlighted that under the current proposals, the Bank of England is maintaining an outright ban on UK commercial banks issuing stablecoins. Innovate Finance is firmly arguing that this ban should be lifted to foster a competitive and dynamic domestic digital asset market.
