Although the global stablecoin market has surged above $280 billion in value, coins backed by the British pound account for only a fraction of this segment.
The U.S dollar has been the underpinning for all the leading stablecoins, and the United States has taken a significant step forward with the passage of the GENIUS Act—the long-awaited regulatory framework governing stablecoin usage in the country.
This U.S. dominance is one of the main reasons 30 of the largest crypto companies, including Coinbase, Kraken, BitGo, and Fireblocks, have urged Britain to reconsider its perspective toward stablecoins. The digital asset firms called for a national stablecoin strategy that “positions stablecoins not as a risk to be contained, but as a financial infrastructure to be responsibly embraced.”
Strengthening Its Position
The firms noted that a national stablecoin strategy will not only keep the UK from lagging behind the U.S. but also would strengthen the UK’s position as a global financial hub and generate new income streams for the nation.
A UK treasury spokesperson told CNBC that the country plans to finalize its framework around all digital assets (including stablecoins) by the end of the year. The official said this legislation was designed to give investors more confidence and drive growth in the UK.
A New Form of Money
Stablecoins have been one of the most impactful forces on the financial services industry in recent years. The digital assets have the potential to solve many long-standing issues like cross-border payment inefficiencies and volatile domestic currencies.
Although stablecoins have substantial potential, concern about the dominance of the U.S. dollar in the market has increased. This is one of the reasons some countries have explored central bank digital currencies (CBDCs), which are issued by a government instead of a company like Circle or Tether.
This could mitigate one of the stablecoin risks—that the company issuing the asset might not have the reserves to back it. Despite the potential benefits of CBDCs, the rapid rise of stablecoins has caused them to fall out of favor with many governments. Only three countries have deployed CBDCs on a national scale, and many other countries have abandoned their CBDC programs.
Interestingly, the UK is one of the countries that have considered scrapping plans for a digital currency. Bank of England officials have said it was more sensible for the UK to focus on other payment innovations rather than on a digital pound and that there was no need to launch a new form of money at this time.
