Are we to see dollarisation of the UK? The Bank of England's struggle with the USD stablecoin revolution
Written by James Tylee founder of Cyber.FM
The dawn of a digital monetary era
In the rapidly evolving landscape of global finance, USD stablecoins (digital tokens pegged to the US dollar), stand at the forefront of a monetary revolution. These assets, which maintain a stable value through reserves of cash or short-term US Treasuries, have exploded in utility, powering everything from cross-border remittances to decentralized finance (DeFi) protocols. According to McKinsey, the total market capitalization of stablecoins has surpassed $250 billion, with USD-denominated variants such as USDT and USDC dominating over 90% of the space. This shift promises disintermediation of traditional banking intermediaries, lower transaction costs and borderless economic activity, fundamentally challenging the role of central banks worldwide.
Yet, as this revolution unfolds, a stark divide emerges between regulatory agility and inertia. In the US, forward-thinking legislation such as the GENIUS Act of 2025 has harnessed industry expertise to integrate stablecoins into the financial fabric, even allowing crypto assets to serve as collateral for Treasury-backed loans. Across the Atlantic, however, the UK’s response has been mired in ambiguity and hesitation. The Bank of England (BoE) and HM Treasury, led by officials whose average tenures span decades and whose ages reflect a pre-digital worldview, appear ill-equipped to navigate this terrain. At 66 years old, BoE Governor, Andrew Bailey, a “lifer” at the central bank with over 40 years of service, exemplifies this generational gap. Similarly, senior Treasury figures, often drawn from the same establishment pools, struggle to reconcile innovative disruption with entrenched prudential concerns. The UK’s top financial stewards have effectively “aged out” of the stablecoin era, evidenced by vague legislation and the BoE’s erratic policy announcements aimed at shielding domestic banks from foreign competition. By contrast, the US leverages the vitality of crypto pioneers such as Coinbase CEO, Brian Armstrong, aged 42, to co-author progressive rules that position America as the global hub for digital assets. The result? A tale of two nations: one sprinting toward innovation, the other stumbling in the shadows of its own caution.
Is the Bank of England set to be the London office of the FED?
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UK’s regulatory fog: ambiguity and back-and-forth
The UK’s faltering grip on stablecoin regulation is not merely a matter of pace but of profound disconnect. Legislation governing USD stablecoins and broader digital assets remains frustratingly opaque, leaving firms in limbo and stifling innovation. The Financial Services and Markets Act 2023 laid the groundwork for a stablecoin regime, requiring issuers to secure authorization from the Financial Conduct Authority (FCA) for activities such as issuance and custody. Yet, by mid-2025, draft rules published in May, for example, Consultation Paper CP25/14, still demand clarification on critical issues such as reserve requirements and interoperability with traditional payments. Critics decry these proposals as “unworkable”, with enforcement mechanisms that could impose crippling compliance costs on smaller players. This ambiguity is compounded by the BoE’s recent vacillations on USD stablecoins, ostensibly to “protect UK banks” from systemic risks. In July 2025, Sasha Mills at the BoE signalled openness to stablecoins’ role in wholesale payments via the Digital Securities Sandbox (DSS), hinting at potential integration into high-value settlements. Just weeks later, however, the BoE proposed draconian caps on stablecoins holdings, £10,000 to £20,000 for individuals and up to £10 million for firms, framed as safeguards against runs on uninsured digital dollars. This U-turn drew sharp rebukes from UK crypto groups potentially driving business offshore. At the heart of this dithering lies a leadership cadre out of sync with the technology’s ethos. Governor Bailey, now in his sixth year at the helm, has presided over speeches extolling “trust and innovation” in the “multi-moneyverse”, yet his proposals smack of 20th-century banking reflexes, prioritizing stability over scalability. HM Treasury officials, whilst younger on average (around 34 for mid-level staff), are bottlenecked by senior policymakers steeped in post-2008 austerity mindsets. The result is a regulatory patchwork that favours incumbents, alienating the very innovators needed to build resilient digital infrastructure. In a sector where half the workforce is under 35, the UK’s greying guardians risk rendering the City of London a relic in the global crypto race.
America’s youthful synergy: leveraging crypto founders for forward legislation
Juxtapose this with the US, where regulatory evolution is turbocharged by direct collaboration with industry trailblazers. Here, the founders of crypto exchanges aren’t side-lined: they’re at the drafting table, infusing legislation with practical insights that disintermediate outdated institutions like the Federal Reserve. The crowning achievement is the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, signed into law by President Donald Trump on July 18, 2025. This bipartisan milestone, the first comprehensive federal framework for payment stablecoins, mandates 100% backing with high-quality liquid assets such as USD cash or short-term Treasuries, alongside monthly attestations to ensure transparency. The GENIUS Act’s genius lies in its disintermediation potential: by empowering non-bank issuers to create stablecoins under federal oversight, it circumvents the Fed’s monopoly on base money creation, fostering a parallel digital economy. Foreign issuers can even tap US markets via licensed digital asset service providers, globalizing the dollar’s reach without taxpayer bailouts. Complementing this, 2025 executive actions and Treasury guidance have greenlit crypto assets as collateral for loans, with the US Treasury explicitly backing such arrangements in corporate treasury management. Reversed policies from prior administrations now treat digital holdings as viable balance-sheet items, enabling firms to pledge Bitcoin or Ethereum against low-interest Treasury loans - a boon for liquidity in volatile markets. Central to this agility is the leveraging of figures such as Brian Armstrong, Coinbase’s co-founder and CEO. Armstrong embodies the crypto vanguard, jetting to Washington in early 2025 to lobby for the GENIUS Act’s passage. His testimony before congressional committees emphasized “bipartisan clarity” for market structure, crediting industry input for provisions that balance innovation with consumer protection. Coinbase’s role extended beyond advocacy; as a key stakeholder, it helped shape custody rules and interoperability standards, ensuring platforms like its own thrive under the new regime. This symbiotic relationship, (regulators harnessing founders’ tech-savvy rather than second-guessing it), has propelled the US to a “golden age of crypto”, as Treasury Secretary, Scott Bessent, declared in July. Whilst the UK’s Bailey mulls 40-year-old dangers, Armstrong’s vision of Coinbase as a “super app” for all financial services underscores America’s edge: youth, collaboration and bold reinvention.
A call to reform: bridging the generational chasm
The contrast between the UK’s sclerotic approach and America’s dynamic integration of stablecoins reveals a deeper malaise: when financial overlords age out of the innovations they regulate, progress stalls. The BoE’s protective flip-flops and Treasury’s ambiguous drafts not only cede ground to US-centric USD dominance but also erode London’s status as a fintech powerhouse. Businesses, forced to navigate forex risks without digital asset alternatives, may flock to clearer shores, accelerating capital flight. Yet, this is no inevitability. The UK could reinvigorate by injecting fresh perspectives, perhaps capping tenures for governors or mandating industry secondees in treasury teams, mirroring the US model. Emulating the GENIUS Act’s reserve-backed framework, whilst recognizing digital asset collateral for gilts-backed loans, would signal adaptability without recklessness. As global stablecoin adoption surges, the question looms: Will the UK cling to its analogue past, or evolve to harness the digital future? For Bailey and his cohort, the clock ticks not just on interest rates, but on relevance itself. In the revolution of money, age is no virtue, agility is. The path forward demands not just new laws, but new leaders to write them of risk indeed dollarisation of the UK economy.