Regulatory alignment and deregulation drive cross-border investment between the US and UK

13 November 2025
by Payments Intelligence

Insight summary

• Finding: The UK and US have established a Transatlantic Taskforce for Markets of the Future to align regulation on digital assets and capital markets, with a 180-day reporting deadline.

• Why it matters: Early regulatory alignment on stablecoins and tokenised finance could prevent fragmentation in inherently global markets and give both jurisdictions competitive advantage over slower-moving regions.

• Who’s affected: Crypto firms, stablecoin issuers, banks exploring tokenised deposits, and payments infrastructure providers should prepare for converging compliance standards and potential cross-border interoperability frameworks.

Introduction

The UK and US financial services industries are collaborating more closely. This is the result of both the creation of new frameworks for collaboration and the removal of regulatory barriers under the Trump administration. Financial services are a significant portion of each country’s economy, accounting for 5.4% of US GDP in Q2 2025, according to the Bureau for Economic Analysis. In the UK, this figure stood at 7.7% in 2024, according to data from the Office for National Statistics. However, divergent prudential standards and regulatory approaches have left capital trapped and operations fragmented across the Atlantic. Now, as both governments look to revitalise investment and competitiveness, a new framework for cooperation is emerging, one focused on the future of capital markets and digital finance.

Industry impact at a glance

Stablecoin issuers and crypto firms

Monitor Taskforce recommendations for potential convergence on reserve requirements, compliance frameworks, and cross-border interoperability standards.

UK challenger banks and fintechs

Evaluate US bank acquisition opportunities as Trump-era deregulation accelerates merger approvals and offers faster market entry than independent licensing.

Global banks and asset managers

Reassess cross-border capital allocation strategies as regulatory alignment reduces trapped capital and opens new investment corridors between UK and US markets.

Barriers to US-UK financial collaboration

Despite the ‘special relationship,’ the UK and US financial sectors have historically faced a series of non-tariff barriers that constrain investment and collaboration. A report from UK Finance notes that while London and New York are unrivalled centres of global finance, divergent prudential and supervisory frameworks often make cross-border operations inefficient and capital-intensive. The report points to differences in how each jurisdiction implements the Basel III framework, calculates risk-weighted assets, and applies leverage and loss-absorbing capital rules. These technical gaps can leave “trapped capital” for global banks with UK and US operations, limiting lending and investment on both sides of the Atlantic. Resolution planning and crisis management strategies also diverge, with the US favouring a single-point-of-entry approach and the UK preferring multiple-point-of-entry approach: there are disparities in the internal total loss-absorbing capacity (TLAC) requirements that arise from these two distinct approaches. Emerging areas, such as the prudential treatment of digital assets and sustainability-related disclosures, risk deepening the divide if the two markets pursue separate standards. Data protection frameworks remain another friction point: UK institutions operate under GDPR, while US firms face a fragmented sectoral regime with inconsistent state and federal requirements. UK Finance encourages closer cooperation between the two states, specifically through mutual recognition, substituted compliance, and enhanced dialogue between regulators. The intention is that this would reduce duplication, improve market access, and free capital for productive use. The existing US-UK Financial Regulatory Working Group (FRWG) provides a platform for this, but the opportunity now lies in extending cooperation to digital assets, sustainability disclosures, and cross-border data sharing. Regulatory alignment, rather than full harmonisation, would help sustain investment momentum between the world’s two largest financial markets while preserving their distinct supervisory traditions.

A Transatlantic Taskforce for Markets of the Future

In September 2025, the UK Chancellor of the Exchequer, Rachel Reeves, and US Treasury Secretary Scott Bessent established a Transatlantic Taskforce for Markets of the Future. The Taskforce sits between the two finance ministries as part of the FRWG with the intended goal of enhancing collaboration on capital markets and digital assets and other innovative financial activities. More specifically, the Taskforce is expected to explore: Options for short-to-medium term collaboration on digital assets while legislation and regulatory regimes are still developing, as well as options for long-term collaboration and additional opportunities for wholesale digital markets innovation Options to improve links between capital markets to enhance the growth and competitiveness of both UK and US markets, focusing on reducing burdens for UK and US firms raising capital cross-border. Collaboration on digital assets is especially pertinent given both countries’ issuance of regulatory frameworks for cryptoassets and stablecoins. Aligning these approaches could prevent regulatory fragmentation in a market that is inherently global, ensuring consistent standards for issuance, reserve management, and consumer protection. Joint work in this area is necessary to enhance cross-border interoperability between digital asset systems, strengthen oversight of stablecoin reserves, and support the development of trusted, scalable infrastructure for tokenised finance across both jurisdictions. The Taskforce will report within 180 days, having sought input from industry.

Growing collaboration

The UK is set to benefit from a wave of US investment. More than £1.25 billion of new private US investment has been committed to the UK, with 1,800 jobs created in the financial services across London, Edinburgh, Belfast and Manchester as a result. The investment comes from some of the most prominent financial services organisations such as PayPal, Bank of America, Citi Bank, and S&P Global. The announcements are the first materialisations of significant commitments by financial companies to ramp up their commercial activity and capital flows between our two economies in the coming years. More broadly, the two countries developed the Economic Prosperity Deal in May 2025, which secured major tariff reductions for key sectors and protected jobs in the automotive and aerospace sector. The two countries are reportedly working on a wider economic deal to increase digital trade, strengthen supply chains, and boost access for the UK’s world-leading services companies. Each country’s financial sector has made significant commitments to ramp up their commercial activity and capital flows between the two economies in the coming years, with these announcements being the first evidence of these intentions. Total investment and capital commitments stand at more than £8 billion coming to the UK and more than £12 billion going to the US.

Company	Direction	Investment
Blackrock	US to UK	£7 billion on behalf of clients and £500 million into enterprise data centres across the country in 2026
Rothesay	UK to US	£7 billion in short-to-medium term, which amounts to doubling its investment in the US
OakNorth	UK to US	£3.5 billion in increased capital and lending to support US operations
Barclays	UK to US	More than £1.5 trillion ($2 trillion) in capital across the US in 2024 with ambitions to double this amount over the next decade

Deregulation under Trump

British fintechs are increasingly interested in buying US banks and acquiring banking licenses under the Trump administration’s more relaxed approach to mergers. Both Revolut and Starling are considering acquiring nationally chartered banks in the US, according to the Financial Times. Acquiring a US bank would provide them with an American banking license and thus enable them to lend across all 50 states and is reportedly faster than applying for a license independently. Michelle Bowman, the vice chair for supervision at the Federal Reserve, called for faster merger approvals in April, stating regulators should adopt a 180-day statutory decision clock for merger applications. The average M&A processing time exceeded 100 days in 2024, up from below 80 in 2021, according to data from S&P Global and the Federal Reserve. Faster approvals are supported by the Office of the Comptroller of the Currency (OCC), where Acting Comptroller Rodney Hood stated the Office’s alignment with Bowman on faster approvals, noting lengthy regulatory reviews deter new entrants at a time when innovation in banking is so needed. The OCC and the Federal Deposit Insurance Corporation, the other main US bank regulator, have withdrawn guidance that complicated the merger process. The net impact of Trump’s financial deregulation is that both acquisitions and banking license applications have been made easier.

Industry voices

"As collaboration between UK and US financial services grows through shared investments and knowledge exchange, the UK is stepping up its regulatory initiatives, focusing on tokenised deposits and strategy for future retail payments infrastructure, aiming to keep pace with US stablecoins and ensure seamless integration across financial services. The UK’s prominent role in Open Banking and the development of Open Finance standards could become major financial innovations exported worldwide. Enhanced regulatory cooperation and alignment between the UK and US will open access to new customers and markets, while promoting more competition, efficiency, and innovation within both countries’ payments sectors."

"For firms partnered with financial institutions on both sides of the Atlantic, the alignment means a clearer path to deploying technologies like stablecoins, tokenization, and on-chain compliance tools in two of the world’s most important financial markets. On stablecoin regulation, the UK can benefit from the ‘second mover advantage’—taking learnings from other jurisdictions such as the US that have already put in place regulation—and develop a distinctive regulatory regime that is agile and internationally competitive. But the time to act is now: without a clear framework for stablecoins, the UK risks losing competitiveness to faster-moving jurisdictions."

"The UK must push for detailed, technical equivalence on capital requirements for global banks, rejecting any race to the bottom in financial (de)regulation. It needs to secure its competitive advantage in the payments sector and protect the sector by rapidly finalising the cryptoasset authorisation framework and the dual-regulated systemic stablecoin regime. The GENIUS Act allows foreign stablecoin issuers to operate in the US only if their home regime is deemed "comparable" by the Treasury, this highlights a strategic opportunity for the UK to push for reciprocal technical equivalence for the UK's systemic stablecoin framework."

Future steps

The creation of the Taskforce and less stringent regulatory approach of the Trump administration are facilitating cross-border investment in the financial service industries of the UK and US.

Both countries have issued regulatory frameworks on cryptoassets and stablecoins in 2025. Alignment on these regulations is important given cross-border payments is one of the key draws for banks and retailers.

Removing regulatory barriers enables financial services firms on both sides of the Atlantic to grow, whilst fostering competition in each market. As collaboration extends into areas such as digital assets, capital markets, and sustainability disclosures, the transatlantic partnership has the potential to shape global financial standards and set a precedent for innovation-led regulatory cooperation.

Implications for PSPs

For PSPs and financial institutions, the proposed framework offers strategic flexibility:

Operational optimisation: PSPs can now align limits with their internal fraud models and customer usage patterns. Transaction risk assessment may consider factors such as payer behaviour, location, and historical spending patterns.
Innovation enablement: By removing prescriptive thresholds, firms may deploy advanced fraud detection systems, integrate digital wallets, and explore account-to-account in-person payments.
Customer-centric strategy: Firms may enable consumers to set personal limits or opt out of contactless entirely, supporting compliance with the consumer duty and delivering tailored customer outcomes.
Risk management: While limits are discretionary, PSPs must continue to monitor low-risk transactions and maintain robust SCA processes where fraud risk is elevated.

The FCA emphasises that firms will likely maintain current limits in the short term, given technical challenges in updating point-of-sale terminals and limited appetite for increasing thresholds. Moreover, the majority of transactions fall well below £50, indicating minimal immediate operational disruption.

Market and economic considerations

The FCA positions this reform as a mechanism to support economic growth and competitiveness:

The exemption allows PSPs to respond to inflationary pressures and evolving consumer spending behaviour.
By fostering innovation, the framework aligns with the FCA’s secondary objective of promoting growth and UK competitiveness, particularly as digital wallets and mobile payments gain traction. In 2024, 57% of UK adults were registered for at least one mobile payment service, up from 42% in 2023, reflecting a significant shift towards digital, tap-and-go payment methods.
The risk-based model maintains low friction at points of sale, supporting retail efficiency and potentially increasing transaction volume.

The FCA estimates that increasing both single and cumulative limits to £150 and £450, respectively, could increase annual fraud by £31.3 million over three years, a 131% increase relative to current contactless fraud rates. However, this represents a worst-case scenario and is mitigated by PSP liability, transaction monitoring, and the consumer duty. The FCA considers this risk unlikely to materialise given current PSP incentives, technological advances in fraud detection, and evolving payment patterns.

Equality, accessibility, and consumer protection

The FCA has carefully considered the impact of removing prescriptive contactless limits on consumers with protected characteristics. Respondents highlighted potential concerns for older adults, those with disabilities, and vulnerable populations, who might face higher fraud risks or accessibility challenges.

The proposed guidance underscores that PSPs should:

Consider consumer needs, particularly for those with low vision, mobility issues, or other accessibility challenges.
Allow customers to set individual personal limits, delivering better outcomes and mitigating potential risks.
Maintain monitoring and fraud prevention mechanisms to safeguard all users.

This approach ensures that consumer duty obligations remain central while allowing firms the flexibility to innovate.