In September the UK and U.S. decided to establish a Transatlantic Taskforce for Markets of the Future. The Taskforce has been asked to report back to both finance ministries, via the UK-U.S. Financial Regulatory Working Group, on recommendations to enhance collaboration on capital markets and digital assets and other innovative financial activities.
In today’s feature we investigate some of the recent steps taken by the UK government and the financial regulator, the FCA. With lots happening in the last few days, it’s worth analyzing the appetite for blockchain within the Bank of England, the Treasury, and the FCA.
The Potential £15–30 billion Prize: Efficiencies in Payments and Collateral
In 2022 DisruptionBanking spoke to Matt Hancock MP. We discussed “Britcoin” and the “brilliant domestic payment system” that the UK enjoys. Importantly, he warned that with CBDCs it could lead to the Bank of England playing the role of a retail bank.
Apart from having a good domestic payment system, it’s also important to highlight the strength of the UK in foreign exchange markets. In September the Bank of England released a survey co-ordinated with the Bank for International Settlements. The UK survey summary included:
- Average daily turnover in the UK foreign exchange market was $4,745 billion in April 2025, up from $3,735 billion per day as recorded in April 2022.
- The UK remains the single largest centre of foreign exchange activity with share of 37.8% of global turnover, a slight decrease from the 38.0% recorded in April 2022 and broadly in keeping with the UK global market share recorded in previous surveys.
- Average daily turnover in OTC interest rate derivatives was $4,320 billion during April 2025, increasing from the $2,359 billion per day recorded in April 2022.
- The UK market accounted for 49.6% of OTC interest rate derivatives global turnover in April 2025 and remains the largest centre in this market. The UK market share in April 2025 was higher than the market share of 42.9% recorded in April 2022, but still below the 50.6% recorded in April 2019.
The estimated annual savings that could be released by implementing instant settlements, reduced intermediation, and programmable collateral could potentially be up to £30 billion. The future of London’s role as an FX leader could depend on correctly implementing tokenization, complemented by using stable coins in various denominations, quickly. These benefits don’t have to come solely from central banking digital currencies (CBDCs), stablecoins are more than capable of helping disrupt and speed up the current status quo.
The Role of Digital Assets in Reducing Settlement Periods in FX Payments
For the UK to continue its role as a leader in FX and payments it needs to stay ahead of the curve. However, innovation emanating from financial centres in New York, Singapore, UAE, and Frankfurt are putting pressure on London to act.
Singapore’s Monetary Authority (MAS) has already finalized a stablecoin framework. The U.S. has the GENIUS Act, while the European Union has implemented MiCA. For the UK to take advantage it needs to issue a GBP stablecoin that could capture some of the margin on the £9 trillion daily flow of FX and OTC combined.
CLS, one of the companies at the center of settlements in the UK, updated users on settlement periods in March 2025. The company highlighted how “most FX payment instructions in CLSSettlement settle according to the market convention of two days after execution of the underlying trade (T+2), with a smaller portion settling the next day (T+1) and only a very small number settling on the same day (T+0).”
The Continuous Linked Settlement (CLS) system settles over $7 trillion average daily value across 18 currencies. It requires settlement members to prefund multilateral net positions, locking in about $66 billion in daily funding during the T+2 settlement cycle. Using blockchain technology could minimize prefunding and allow liquidity via smart contracts. It may cause other challenges with liquidity, but the goal should be to achieve instant settlement in the future by allowing banks and other financial institutions to use capital that would normally be unavailable during a settlement period.
Is the UK Embracing Digital Assets and Distributed Ledger Technology?
On paper the UK is a global finance powerhouse. It is also the country with the third largest stockpile of bitcoin, 61,245 BTC to be precise. To highlight the size of the stash, Tether, the largest stablecoin company, holds 87,275 BTC.
What is the UK government doing with these bitcoins? Many of them have been collected from criminal seizures and the government is trying to determine how much of the seized BTC constitutes “criminal proceeds.” Unfortunately for many crypto enthusiasts, in March 2025 the UK Treasury confirmed that it had no plans for establishing a strategic bitcoin reserve.
The Chancellor could have used the bitcoin to plug the budget deficit in the recent UK budget. But selling its stash of bitcoins could have influenced prices and harmed UK crypto hodlers.
HM Treasury Confirms that Cryptoasset Firms are Welcome in the UK
Just this week the Treasury has stepped up and published a statement jointly with the Chancellor of the Exchequer. Together they confirmed that cryptoasset firms will be backed to innovate and grow under plans to make the UK a global destination for digital assets and attract more investment.
The new regulations are due to take place by 2027. Market reaction has been largely positive. The leading UK blockchain platform Quant posted on X how: “this framework provides the clarity innovative firms need while protecting consumers. At Quant, we welcome technology-neutral regulation that enables responsible innovation.”
Keith Grose, Senior Country Director at Coinbase in the UK posted on LinkedIn how he is “excited to build the future of crypto here in London and the UK!”
Recent Lessons for the UK
A few weeks ago, we highlighted how the State of Wyoming had implemented a local stable token for less than $5 million dollars. Sir Howard Davies, the former Chairman of NatWest, was recently involved in the launch of the new Euro stablecoin, and has great experience in the sector.
There is a British stablecoin with a circulation of £3.8 million already in circulation. The company behind it is a member of the Digital Pound Foundation. Incorporated in 2021 the Foundation is now a program under Innovate Finance which focuses on advocating for a well-designed digital pound.
The Foundation submits evidence to parliamentary inquiries and responds to consultations, but its role is advisory only. It’s the Bank of England and the Treasury that are at the heart of the digital pound.
In October 2025 the Bank of England published an update on the design phase of the digital pound project. The Bank hasn’t made a decision on whether it will introduce a digital pound yet though.
The FCA’s Crypto Roadmap
In the meantime, the FCA seems to be moving faster. Under the leadership of CEO Nikhil Rathi, since October 2020, the UK’s primary financial regulator has been pro-consumer. However, it has drawn criticism for being slow compared to the EU or Singapore.
In November 2024 the FCA published a Crypto Roadmap for the UK. The main points of the roadmap include:
2020 (Q1): Marked the application of Money Laundering Regulations legislation to crypto firms, an early step in oversight.
2023 (Q4): Financial Promotions rules went live, requiring clearer marketing standards for crypto products.
2024 (Q4): Planned publications on complaints handling, conduct rules (COBS), governance (including SMCR), admissions/disclosures, and market abuse (via discussion papers).
2025:
- Q1/Q2: Focus on stablecoins, including rules for backing assets, redemption, custody, recordkeeping, reconciliations, asset segregation, and use of third parties.
- Q3: Introduction of a new prudential sourcebook covering capital, liquidity, and risk management.
- Q4: Rules for trading platforms, intermediation, lending, and staking (including resolution); completion of the prudential sourcebook; and policies on groups and reporting.
2026: Final rules implemented, with all policy statements published to complete the regime.
Regulatory Momentum Building
To continue the debate, last week Nikhil wrote a letter to the Prime Minister, Sir Keir Starmer. The letter was an update on the FCA’s approach to growth and mentioned crypto and blockchain several times.
In the letter, Nikhil committed to “finalise the digital assets rules and progress UK-issued stablecoins,” in 2026.
He also added a summary of how the FCA consulted on a proportionate regime for digital assets and allowed retail crypto exchange traded notes (cETNs). Additionally, the FCA has supported the acceleration of the transition to settling certain trades 1 business day after execution, with a deadline now of 11 October 2027.
In 2025, the FCA expanded its pre-application support, with 158 wholesale, crypto and payments firms applying since April, and providing more certainty faster by letting over 200 firms know that the FCA was ‘minded to approve’ them.
And, to continue the momentum further, the FCA published consultation paper 25/40 a request for feedback on proposals for UK crypto rules on Tuesday this week. This paper is one of three consultation papers released by the FCA.
Are the FCA and the Treasury Serious About Blockchain?
The above statements don’t change the fact that earlier this year, Nikhil told politicians that too many young people invest in crypto, and how they should invest in stocks or bonds instead. On top of this, in 2023 the FCA rejected 85% of crypto firm applications, which grew to 87% in 2024. Some consider this to be the reason that the UK is falling behind other jurisdictions.
David Geale, Executive Director, Payments and Digital Finance and Payment Systems Regulator Managing Director at the FCA had more to share at a November City & Financial Global event. During the event David explained how “some commentators say we are behind the U.S. In my view we aren’t.
“We have consulted on regulatory requirements for stablecoin issuers and prudential requirements that clarify what is expected of firms – thus providing more detail than legislation alone.”
David also pointed to HM Treasury’s National Payments Vision which states how ‘next generation’ technologies like blockchain, DLT, and the associated ‘tokenisation’ of assets, and initiatives leading to central bank digital currencies, stablecoins and the Regulated Liability Network are a priority. How innovation, efficiency and economic benefits such developments could bring are potentially transformational.
Regulation is Coming
This week David shared a further update. He stated that: “Regulation is coming – and we want to get it right. We’ve listened to feedback, and now we’re setting out our proposals for the UK’s crypto regime.
“Our goal is to have a regime that protects consumers, supports innovation and promotes trust. We welcome feedback to help us finalise these rules.”
The UK may be doing better with topics such as cETNs and stablecoins, but delays to applications by crypto firms continue to be flagged online. Should approvals reach 50 percent, as opposed to earlier years, the UK may well be back on track to being “open for business.” If not, then it will be ‘business as usual’ instead.
Crypto media had a neutral to positive response to the Treasury’s statement this week, whereas the wider media is more bullish. It appears that blockchain is something the Treasury and the FCA are looking at very seriously. Crypto? Not so much.
Author: Andy Samu
See Also:
The Digital Pound Foundation Officially Becomes Part of Innovate Finance | Disruption Banking
FCA seeks feedback on proposals for UK crypto rules | Disruption Banking
