Stablecoins have moved from a niche trading instrument to a systemically significant on-chain asset class, with a global market capitalisation of roughly $306 billion by late 2025. Yet sterling barely features. USD-denominated stablecoins account for over 98% of that market; sterling, by contrast, makes up around 10% of global FX turnover. The asymmetry is, in our view, a structural underrepresentation of the pound in tokenised money infrastructure – and a question of UK monetary and regulatory sovereignty.

In March 2026 the Digital Trust Centre of Excellence submitted written evidence to the House of Lords Financial Services Regulation Committee‘s inquiry into the growth and proposed regulation of stablecoins. The submission was drafted by CEO Peter Ferry, and visiting academic James Ball, drawing on an online survey of Centre’s members across Scottish fintech, finance and academia. What came back was substantive, and the headline is straightforward: the principal risk in the proposed regime is not moving too fast, but moving too slowly.

Why this matters for Scotland

Scotland’s financial and related professional services sector employs around 151,000 people and supports roughly £690 billion of assets under management, according to Scottish Financial Enterprise. Financial services is the single biggest sectoral contributor to Scotland’s economy, accounting for around a tenth of national gross value added. That activity depends on settlement infrastructure that is competitive, resilient and denominated in sterling. As institutional financial markets migrate towards on-chain settlement, UK firms without access to a regulated sterling stablecoin face a choice: route through USD-denominated instruments and the regulatory conditions that govern them (OFAC rather than OFSI, FinCEN rather than the FCA) or operate at a disadvantage to counterparts that have a regulated domestic option. Members were clear: that is not a theoretical concern for asset managers north of the border. It is already shaping product decisions. [OFAC and FinCEN are the US Treasury bureaux for sanctions and anti-money-laundering supervision; OFSI and the FCA are their UK counterparts].

What the Committee heard from us

Our submission backs the development of a regulated sterling stablecoin market, and treats the current legislative programme as the precondition for it. But it argues, in detail, that the proposed framework is calibrated for a scale of adoption that does not yet exist — and that the calibration risks preventing the market it is intended to govern. Four positions sit at the centre of the evidence.

The wholesale gap. The proposed holding limits – £20,000 for individuals and £10 million for businesses – are too restrictive for the wholesale settlement and treasury functions our members identified as the principal demand. Backing requirements set higher than those in the EU’s Markets in Crypto-Assets Regulation (MiCAR) compound the problem. At these thresholds a sterling stablecoin would be structurally prevented from serving the use cases – delivery-versus-payment, collateral mobility, intraday liquidity – that make tokenised settlement worthwhile.

Regulatory delay as systemic risk. The full cryptoasset regime is not scheduled to take effect until October 2027. The joint Bank of England and FCA approach document, which would clarify how supervisory responsibilities split in practice, has slipped to later in 2026. For firms considering whether to build sterling stablecoin infrastructure now, that absence functions as an active suppressor of investment. The Bank’s November 2023 “Dear CEO” letter directed regulated banks not to issue stablecoins before any legislative regime existed. This went further than supervisory expectation should – and excluded the institutions best placed to build credible sterling stablecoin infrastructure before the rules governing it had even been written

The FCA-to-Bank cliff edge. The binary systemic / non-systemic distinction, and the transition from FCA to Bank of England oversight at the point of systemic recognition, is the single most significant near-term barrier members identified. Issuers cannot know in advance when they will be designated systemic; the compliance costs of that transition are substantial. MiCAR’s split between e-money tokens and asset-referenced tokens provides clearer legal categories and gentler scaling, and we recommend the UK align with it rather than treat the US GENIUS Act as a design template.

The decentralised gap. Crypto-collateralised stablecoins – DAI, GHO and others – operate on permissionless ledgers with no issuer to regulate and no segregable backing assets. The current proposals do not address them. Members regarded this as a material gap that will grow with activity on public ledgers, and one regulators should not leave indefinitely outside the framework.

What the Committee will weigh up

Oral evidence to the inquiry closed on 15 April 2026. The Committee heard from the Bank of England (Deputy Governor Sarah Breeden and Sasha Mills on 11 March), HM Treasury (Economic Secretary Lucy Rigby KC MP), the FCA (David Geale and Matthew Long), and a mix of issuers and payments firms including Circle, Mastercard, Coinbase, Revolut and the UK-issuer Agant. Scotland was not represented at the oral sessions; the CoE’s contribution is in the written record as STA0038.

At the 15 April session the FCA characterised the UK regime as ahead of other jurisdictions on regulatory clarity – a fair description of how quickly the framework has moved. The concern our members raised, and which our submission sets out, is calibration rather than pace: a regime sized for a market scale that does not yet exist, and without a credible wholesale pathway, risks producing rules that are early but not yet fit for the use cases that matter to Scotland. The Committee’s report, expected later in 2026, will be the next public inflection point; the joint BoE/FCA approach document, deferred from earlier this year, sits alongside it.

From members’ input to the public record

The Digital Trust Centre of Excellence exists to turn industry and academic expertise into evidence that reaches policymakers, and to do that work from Scotland for Scotland’s financial-services strength. Our submission focuses on the institutional end of the market – wholesale settlement, treasury operations, asset management – and sits alongside our work with the Bank of England on the DLT Innovation Challenge.

At the other end of the spectrum, two of the innovators selected for our second Innovation Challenge Call – Stabledrop (B2B stablecoin payments with built-in buyer protection) and Stableport (B2B cross-border payments) – are looking at what stablecoins can do for the SME end of the market, where late payments and slow invoice finance still hold small businesses back. Although not all SME use cases sit in the same regulatory frame, innovators’ products and decisions on where to base themselves will be shaped by what the Committee concludes. We will be reading its report carefully when it lands.

Further reading

Digital Trust Centre of Excellence: Written evidence to the House of Lords (STA0038)
House of Lords Financial Services Regulation Committee: Inquiry page
Bank of England oral evidence – Sarah Breeden and Sasha Mills (March 11, 2026)
James Ball: Commentary on the submission
Bank of England: Consultation on the regulatory regime for systemic payment systems using stablecoins

FCA: CP25/14: Stablecoin issuance and cryptoasset custody