Stablecoin acceptance and the future of the UK stablecoin sector

How Stablecoins are already changing the banking and payments landscape and challenges for the UK market

Strategic M&A activity in the stablecoin payments market is picking up pace as reflected in a series of moves by industry leaders in the space. The latest example of this is the recent announcement of the acquisition of Iron, an API-first stablecoin infrastructure startup, by US crypto payments specialist MoonPay. 

In this article, we look at the growing use of stablecoins in payment acceptance and some of the issues facing the UK market and the future of this sector in the UK.

What are stablecoins?

Stablecoins are generally blockchain-based crypto asset tokens backed by traditional fiat currencies or other real-world assets. These may be crypto tokens backed 100% by fiat cash equivalent assets and redeemable 1:1, for example, for US dollars or Euros. Other types of stablecoins may be crypto-backed, achieving stability through over-collateralisation, or controlled by some form of smart contract-based algorithm. 

They’re designed to offer stability in the often-volatile crypto market, with the idea that the value of the US dollar or Euro is less prone to the volatility faced by other types of crypto assets. Particularly in the case of fiat-backed stablecoins, they are often seen as a bridge between crypto and traditional finance and are increasingly used as a bridge to traditional payments rails and payment methods. 

How are stablecoins being used in payments acceptance?

Merchants are increasingly looking to offer customers a range of payment methods to streamline the customer payment journey, boost revenue and cater to customer preferences, including a growing number of crypto-native users.

Similarly to Open Banking, stablecoin acceptance services also have the potential to increase competition and innovation in the payments market by offering merchants a further alternative to card-based payments for customers paying via stablecoin. The technology offers the scope for faster settlement times and lower transaction costs to traditional payments rails.

Regulatory landscape and challenges for the UK stablecoin sector

One of the key challenges in the UK market has been the UK's pace of delivery of a stablecoin regulatory regime. There are growing concerns that the UK is lagging behind other jurisdictions where the regulatory framework is more advanced or already in place (see here for our MiCAR Tracker for information on the implementation of the EU regime).

The regulation of stablecoins in the UK is tied up in the wider cryptoasset regulatory regime which has been progressing steadily.  The expectation is now that legislation regulating cryptoassets will be introduced and include creating a new regulated activity for issuing stablecoins.

The Government published the National Payments Vision (NPV) in November 2024 and emphasised the growth agenda of the UK government (Government) for the payments sector in the future. The NPV recognised that the UK needs to be ready and have capacity for tomorrow’s innovation, including ‘next generation’ technologies such as stablecoins. Also, in November 2024, the UK Financial Conduct Authority (FCA) published its Crypto Roadmap, signposting a consultation paper on stablecoins for "Q1/Q2" 2025. 

More recently, on 14 April 2025, the Financial Service Regulatory Initiatives Forum (the coordinating body for key financial regulators in the UK) published a Regulatory Initiatives Grid. The Grid sets out the planned regulatory initiatives for the next 24 months. 

The Grid states that draft legislation creating a financial services regulatory regime for cryptoassets in the UK, including stablecoins, led by HM Treasury, will be published in Q1 2025. Formal engagement is planned between April and June 2025, with legislation to be laid in 2025. Following HM Treasury legislation being laid out, new RAO Activities will come into the FCA’s remit, alongside the Admissions and Disclosure and Market Abuse regimes. The Grid refers back to the FCA’s Crypto Roadmap (linked above) for the planned FCA publications for the rules and requirements to bring this new regime into effect.

The sector is imminently expecting a first look at the draft regulation.  

A series of consultation papers on the regulation of stablecoins are still expected in Q2 this year. They will address regulatory challenges/risks around backing assets and custody requirements. A further consultation is expected to include trading platforms, intermediation, lending, staking and prudential considerations. The Grid confirms that at least one Discussion Paper and four Consultation Papers are planned for this year.

The aim is to get final rules published in 2026. 

See here for our detailed Bird & Bird UK Payments Horizon Scanning Roadmap for Q2 2025.

What’s next?

It is a critical time for cryptoasset regulation in the UK and the industry is eagerly awaiting clarity, speed and an understanding by regulators of the unique characteristics of stablecoins and digital assets more broadly to enable growth. Getting the design of the regime right will be essential. 

Only then will this new and innovative technology be able to take off in the UK and for merchants and customers alike to benefit from stablecoin acceptance services as part of the UK’s retail payments infrastructure. 

The challenges of global cross-border payments are a persistent pain point for the digital economy. As noted in the National Payments Vision, “the innovation, efficiency and economic benefit such developments could bring is potentially transformational”.

Please contact us at Bird and Bird for any more information on the above. We’re here to help firms looking at designing or rolling out products in this sector.