The UK is in danger of falling behind its global rivals in the fast-moving world of finance, according to a new report on the rise of stablecoins.
The UK economy is the only major market that has not yet introduced a stablecoin policy framework. The authors of the report warn that without decisive regulation and support for sterling-backed stablecoins, London risks losing its status as a key global hub for finance.
The British economy currently accounts for around 3.5 percent of global GDP,11 percent of the financial technology sector and 40 percent of global foreign exchange turnover.
The report, Mind the Gap: How stablecoins can secure the UK's financial future led by Imperial Business School, found that while the European Union, United States, Singapore, Hong Kong and Japan have all implemented dedicated regulatory frameworks for stablecoins - digital tokens pegged to traditional currencies such as the US dollar - the UK has yet to act.
It warns that the lack of a sterling stablecoin is forcing UK businesses to rely on US dollar and euro alternatives, exposing them to foreign exchange risks and embedding "digital dollarisation" in international commerce. It calls on policymakers to accelerate the creation of a clear framework for GBP stablecoins, incentivise high-quality issuers to establish operations in the UK, and integrate stablecoins into domestic financial infrastructure.
"Unless the UK acts now, it risks ceding monetary sovereignty and financial leadership to countries that have moved faster to embrace this transformation." Professor Gilles Chemla Co-Director of the Centre for Financial Technology at Imperial Business School
Without these steps, the UK risks losing its fintech leadership, driving talent and capital abroad, and diminishing its influence over the rules of global finance.
Professor Gilles Chemla, Co-Director of the Centre for Financial Technology at Imperial Business School and lead author of the report, said: "Stablecoins are no longer experimental technologies — they are becoming the foundation of the global digital economy. Unless the UK acts now, it risks ceding monetary sovereignty and financial leadership to countries that have moved faster to embrace this transformation. Our report shows that London has the talent, the markets, and the history to lead the digital economy, but delay in implementing a regulatory framework for stablecoins is eroding that advantage."
The rapid rise of stablecoins
Stablecoins already represent a market of more than $280 billion, dominated by US dollar-backed tokens. Their rapid adoption by consumers and financial institutions is transforming global payments and financial infrastructure. Stablecoins enable lower transaction costs and faster settlements and promote financial inclusion by supporting remittances and expanding access to financial services for the world's unbanked population.
The growth of this sector is helping traditional financial institutions bridge the gap with the digital asset ecosystem and reduce reliance on legacy IT systems.
With major institutions from banks such as JP Morgan to Visa building their future business models around stablecoins, the UK's absence from this market represents both a strategic vulnerability and an economic missed opportunity, according to the report authors.
The report drew on insights from dozens of globally leading academics, policymakers and financial industry practitioners.
The research was led by Professor Gilles Chemla alongside Professor William Knottenbelt, Director of the Imperial College Centre for Cryptocurrency Research and Engineering.
The report is available to download from the Imperial Business School website.
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