Shah Ramezani has been building crypto startup Noah with cofounder Thijn Lamers for the last five years from its base in London. But despite that he has no idea when he’ll next be able to serve customers from the UK.
Two years ago Noah, which is building in the buzzy area of stablecoins, a type of cryptocurrency pegged to a fiat currency such as the US dollar, suspended operations in its home country after its financial regulator, the Financial Conduct Authority, brought in new rules on crypto promotions.
The requirements restricted lawful promotions – including soliciting UK-based customers — to those already FCA-authorised, leading to crypto companies pausing UK services as they sought to comply. Many of them are still going through the process.
“The UK has amazing talent in fintech,” Ramezani says, “but what we don’t have is a feeling that there’s governmental or regulatory support […] there’s a disparity between what the government says and what the FCA does.”
Noah, which provides an API for stablecoin payments, isn’t the only stablecoin startup to pull back from the UK.
Sling Money, a stablecoin remittance startup based in the US and the Netherlands founded by former Monzo chief product officer Mike Hudack, is available in more than 140 countries, but is in closed beta in the UK.
Will the UK miss out on the stablecoin boom?
Proponents say stablecoins could make international payments faster and undercut remittance rates.
Similar to well-known cryptocurrencies like Bitcoin, stablecoins run on blockchain technology. But unlike their volatile counterparts, they keep a 1:1 peg with reserves — typically cash and short-term US government bonds. Large-scale issuers like Tether and Circle pocket that yield to make billions in annual profit. That said, they’re not without their risks.
The promise has caught the eye of brand-name fintechs such as the UK’s ClearBank and Revolut, which are also working on stablecoin projects according to previous reports. But neither of those have come to fruition, reportedly due to the regulatory standstill. Revolut and ClearBank declined to comment on their stablecoin plans.
“Founders need regulatory clarity to have the confidence to innovate and build,” says Keith Grose, UK CEO of American crypto exchange Coinbase. “Without final rules, we are unlikely to see stablecoin innovation in the UK.”
The FCA is still in the consultation phase of its crypto regime, which it expects to become operational in 2026. Its proposed rules aren’t giving industry figures much confidence though.
In the UK, stablecoins start under FCA supervision, where issuers can fund themselves from the yield on reserve assets, though they can’t pay interest to holders.
But if a token gains wider adoption and is designated systemic — meaning it operates much like a major payment system — supervision shifts to the Bank of England, which bans reliance on reserve income and forces issuers to adopt a completely different, transaction-fee-based business model.
This creates a cliff edge that makes scaling nearly impossible without restructuring, says Grose. “For all these reasons, we see a worrying lack of stablecoin innovation in the UK.”
The FCA did not respond to a request for comment by publication time.
‘First mover advantage’
The EU and the US have both recently introduced regulatory frameworks for stablecoins which have instilled confidence in the asset class. Last month, US president Donald Trump signed the GENIUS Act into law. And the EU’s stablecoin rules have been in application since last June.
Both of these formalise rules on the digital tokens, requiring issuers to be licensed, fully backed and redeemable.
In the wake of the legislation’s signing, US fintechs like remittance company Remitly have moved to roll out stablecoin-based products. AI fintech Cleo, which is incorporated in the UK but only serves customers in the US, is also in the early stages of exploring a stablecoin product, founder and CEO Barney Hussey-Yeo told Sifted in an interview earlier this month.
In the EU clearer rules have helped to facilitate a spate of new Euro-based stablecoin projects. Lightspeed-backed Schuman Financial, for instance, last year launched EURØP, a fully-regulated Euro-backed stablecoin with reserves held in major European banks such as Société Générale. This was made possible by regulatory clarity in the EU, says Schuman Financial’s founder Martin Bruncko.
Other stablecoin projects include USD-EMT, which was issued by Société’s Générale subsidiary Forge and AllUnity’s EURAU, a joint venture between financial firms DWS, Galaxy and Flow Traders.
“It seems like that first mover advantage has started to kick in,” says Mark Aruliah, head of EMEA policy and regulatory affairs at crypto data company Elliptic. “We’re seeing a lot of interest in Europe coming through.”
It might not be a race that’s run yet though. David Sutter, the CEO of London-based stablecoin startup OpenTrade, says he expects the FCA to create a more open regulatory framework than the EU’s.
He points to how the EU’s stablecoin legislation largely favours Euro-based stablecoin issuers over other currencies. In comparison, the UK is expected to exempt overseas stablecoin issuers from complying with its new cryptocurrency rules.
“I think they’ve been more inviting in that regard than when you look at Europe, which has tried pretty hard to protect the Euro and make it harder for non-Euro-based stablecoin issuers,” he says.
Both UK and European stablecoin players have a long way to go before rivalling the US.
Close to 99% of stablecoin supply on the widely used Ethereum blockchain is in USD-denominated stablecoins, according to data collected by crypto research outlet The Block.
And while Bruncko says this will change as stablecoins become more institutionalised, Euro stablecoins are still a drop in the ocean compared to dollar digital tokens.
Still, industry watchers say no regulation is better than nothing. Once the UK’s regime does go live, it’ll have to play catch-up to both the EU, the US and other jurisdictions in Asia Pacific and the Middle East.
Read the orginal article: https://sifted.eu/articles/stablecoin-rules-analysis/
