How stablecoin regulation is reshaping payments in 2026

14 November 2025
by Payments Intelligence

Finding: Global progress on stablecoin regulation, led by the US GENIUS Act and MiCA, is accelerating adoption and prompting banks, fintechs, and retailers to explore issuance and on-chain settlement.
Why it matters: Clear guardrails are transforming stablecoins into credible payment instruments, driving demand for US debt, reshaping cross-border settlement models, and raising the stakes for the UK to move faster.
Who’s affected: Banks, PSPs, fintechs, and merchants must prepare for regulated stablecoin integration across treasury, settlement, and payment flows, while UK firms face strategic pressure as other jurisdictions advance ahead.

Introduction

Stablecoins have moved from a speculative corner of digital assets to a serious consideration for banks, retailers, and payment providers. The arrival of formal regulation in the United States through the GENIUS Act, combined with the earlier frameworks in Europe and Asia, has created the clarity institutions needed before treating stablecoins as part of mainstream payment and treasury architecture. This shift is reshaping how organisations think about settlement efficiency, cross-border liquidity, and the long-term direction of digital money.

At the same time, regulatory momentum is influencing global capital flows. Stablecoin issuers have become major buyers of US government debt, strengthening the role of the dollar while prompting other regions to respond. Europe is pushing ahead under MiCA and several major banks are developing their own coins, while the UK faces pressure to accelerate its regime to avoid becoming a user, rather than an issuer, jurisdiction. Against this backdrop, payments leaders now have to make strategic decisions about how and when to integrate stablecoins into their operations.

Industry impact at a glance

Banks and financial institutions

Regulatory clarity is enabling banks to explore issuing their own stablecoins and to integrate them into settlement, liquidity, and treasury operations.

Fintechs and PSPs

The shift toward regulated stablecoin frameworks is opening opportunities for new payment rails, yet uncertainty in the UK still slows product development and investment decisions.

Merchants and global retailers

Stablecoins offer faster, cheaper settlement and reduced card-related costs, prompting major retailers to assess whether on-chain payments can enhance cash flow and international sales.

Regulation spurs global adoption

The proliferation of stablecoin legislation and legal frameworks has provided the regulatory clarity for banks and retailers to innovate. Banks, fintechs, and retailers have all expressed interest in the technology, now that the US has set out a legal framework through the GENIUS Act, despite jurisdictions like the EU, Australia, Hong Kong, Japan, and Singapore already having legislation in place. Many cite US regulation as prompting additional interest in the technology, as European players seek to counter US dominance in the market.

Stablecoin issuers are also a significant source of demand for US government debt, which serves as both a motivation for the bill and will likely become more prevalent following its enactment.

Research from Deutsche Bank indicates that crypto trading accounts for between 88% and 90% of stablecoin transactions, with retail and cross-border payments each comprising around 2%. These figures reflect current on-chain activity, which is still dominated by trading rather than payments use.

This is set to change as regulatory clarity spurs interest from financial institutions and retailers to explore stablecoins. Though most interest is found in the US, the GENIUS Act has prompted their European counterparts to act, with those operating within the EU working under the MiCA framework and the British government publishing its own provisional legislation for a stablecoin regime.

The current regime, governed by the Payment Services Regulations 2017 (PSRs) and Electronic Money Regulations 2011 (EMRs), requires firms to safeguard funds received for payments or e-money issuance. However, high-level requirements have led to inconsistencies, as highlighted in the FCA’s 2025 portfolio letter to payments firms and a multi-firm review on risk management. Legal uncertainties, such as those from the Ipagoo LLP insolvency, have further complicated matters, questioning the status of relevant funds in shortfalls.

HM Treasury’s Payment Services Regulations Review (2023) and the FCA’s Consultation Paper CP24/20 highlighted widespread weaknesses with the PSRs and EMRs, including poor reconciliation practices, incomplete records, and uncertainty in insolvency law.

The FCA has proposed a two-stage reform:

The Supplementary Regime (interim), designed to strengthen existing PSRs and EMRs, improve compliance, and enhance reporting, coming into force on 7 May 2026
The Post-Repeal Regime (end-state), a future framework modelled on the Client Assets Sourcebook (CASS), which would hold customer funds in statutory trusts. There is currently no timeline for this.

Banks and retailers explore stablecoins

The benefit of stablecoins is settlement efficiency. Traditional payments rails can incur settlement delays of several business days when sending payments cross-border. Legacy methods typically involve multiple intermediaries such as correspondent banks and clearing houses, generating high fees.

For retailers, stablecoins bypass the interchange fees of card networks. Faster settlement also improves cash flow and is particularly appealing to global retailers where stablecoins present a unified currency.

Societe Generale launched the first institutional stablecoin on a public blockchain in April 2023, with the introduction of EUR CoinVertible (EURCV), a euro-backed stablecoin via its digital asset subsidiary SG-FORGE. It also became the first major bank to launch a dollar-backed stablecoin when it launched USD CoinVertible USDCV in June 2025. Both are fully MiCA compliant.

On 27 October 2025, Japanese start-up JPYC launched the first yen-pegged stablecoin (JPYC). It is licensed as a fund transfer service provider under Japan’s Payment Service Act, which it amended in 2023 to regulate stablecoins. The amendment stipulated full trust protection of reserves, redemption guarantees and periodic transparency reports.

Industry voices

“Santander shares the vision of a multi-money ecosystem, flagged in the PVDC strategy, and envisage a future where money is interoperable between the differing forms. We certainly favour the protections that can be provided through the tokenisation of commercial bank deposits and recognise that stablecoins will form part of the wider choices. It is crucial that regulators deliver this future in a manner that creates an attractive and safe proposition for all firms, and recognise that the proposed composition and holding limits may constrain that attraction. Comparability with the US GENIUS Act will be a key enabler.”

“The GENIUS Act is a big step forward for stablecoins, giving them the recognition as the link between traditional finance and digital assets. It is good to see regulators focus on transparency and reserves, helping build trust with banks and retailers. There is more work to be done around global standards and cross-border use. Personally, I worry that the conversation overlooks inclusiveness. Coming from a developing country, I have seen how stablecoins can protect people from inflation and currency devaluation. To me, they are more than a financial tool, they are a pathway to real economic empowerment and equality worldwide.”

“The UK is at a critical juncture in the global stablecoin landscape, with industry leaders concerned by the slow pace of its regulatory approach. Expected in 2026, the UK framework follows both the US GENIUS Act and MiCA. This timing allows the UK to learn from early implementations and avoid pitfalls. The UK’s strong financial regulatory tradition and global reputation for prudence provide a solid foundation for a regime that sets high standards for safety and resilience in digital assets. By engaging closely with the industry, the UK can lead through trust, standards and institutional confidence rather than speed alone.”

“The passage of the US GENIUS Act in 2025 ended a regulatory stalemate in the USA and fuelled a global turning point for stablecoins. It offered federal protection for stablecoins backed 100% by USD liquid assets. This regulatory clarity is projected to channel over $1.9 trillion into U.S. Treasury purchases by 2030. Stablecoins are attractive due to lower transaction costs and enhanced speed. However, significant risks persist: the concentration of Treasury holdings by issuers could alter government funding dynamics, and the dollar's dominance makes the system vulnerable to fluctuations. The remedy? Diversification of pegged assets. Europe, let's start building.”

“If the US Treasury grants recognition to comparable jurisdictions under section 18, while the UK's regime remains delayed past Q1 2027, we're likely to see stablecoin issuance and payment volumes migrate to jurisdictions with compliant frameworks. The Act's framework around reserve composition and redemption standards sets a benchmark the UK should match or exceed. Timely implementation and mutual recognition are necessary to prevent British fintechs from integrating with US-issued stablecoins by default, thereby making the UK a user rather than an issuer jurisdiction. This would be a missed opportunity. The Treasury and FCA are right to consult, but they must move faster.”

“Fscom observes a marked increase in interest in cryptoasset activity within the payment services sector, primarily in the use of stablecoin for payment flows. Stablecoin offers significant advantages in terms of speed, reliability, and cost for both payments firms and their end customers. While the FCA is moving in the right direction by developing a robust regulatory framework, with finalised guidance expected next year, the current uncertainty poses challenges. Despite the welcome direction overall, the regime remains in flux, and the industry needs greater clarity and assurances to make informed business decisions that will shape the future of their operations.”

“Regulatory harmonisation is the biggest barrier to accelerated stablecoin adoption. Regulations like SCO60 are overly punitive and don’t align with actual risks, pushing a growing and innovative sector to operate outside the regulated banking system, undermining the goal of comprehensive financial stability. Interoperability is the essential counterpart to this. Without interoperability, a dollar-backed stablecoin issued under one jurisdiction’s rules may not be easily exchangeable or usable in another, defeating its core purpose. Achieving a more inclusive and efficient global financial system will be done through these two pillars: risk-sensitive regulatory alignment and an unwavering commitment to interoperability.”

The advantages have been apparent for some time; what has changed is the regulatory clarity. As stablecoins sit at the intersection of money, securities, and payments law, it was not inherently clear which regulator had authority over the technology. As a result, banks risked breaching capital, liquidity, or money-creation limits and retailers: money transmitter licensing or AML obligations.

Regulation has created the guardrails and, subsequently, the confidence to treat stablecoins as a legitimate part of the payments and treasury infrastructure. The US’s dominance in the market is prompting foreign players to invest to avoid being left behind.

The US is motivated to establish a legal framework for stablecoins, as they serve as a means of reinforcing the global role of the dollar, particularly in light of China’s consideration of a yuan-backed coin. The lack of a pound sterling-denominated coin has led many in the UK to call for greater regulatory clarity to remedy this and benefit from foreign demand for the pound.

The growth in stablecoin investment is also increasing demand for US debt, as Treasury Bills (T-Bills) and other debt securities serve as backing assets for stablecoin issuers.

Stablecoin issuers want US government debt

Stablecoin issuers are now a significant source of demand for US government debt. Issuers use US Treasury debt as backing assets as they are regarded as the safest and most liquid security in the world.

Tether and Circle, the two largest issuers, purchased $56.6 billion in Treasury holdings between June 2024 and June 2025; if they were a nation, they would be the sixth largest source of new demand, exceeding Japan, Singapore, and Norway.

Data from FXC Intelligence indicates Tether’s USDT and Circle’s USDC have a combined market capitalisation of $240 billion, amounting to an 84% market share.

Tether, whose USDT is the largest stablecoin by market capitalisation, held more than $127 billion in US Treasury debt, as detailed in BDO’s Reserve Report audit from June 2025. The majority of the company’s exposure is direct in the form of Treasury Bills, but Tether also holds Overnight Reverse Repurchase Agreements (ON RRP), Term Reverse Repurchase Agreements (RRP), and Money Market Funds.

It follows that increased stablecoin use means increased demand for US securities: the US Treasury Borrowing Advisory Committee forecasts demand for US Treasury bills alone could reach $1 trillion by 2028.

Stablecoins pegged to the US dollar account for 98% of the $300 billion global market; at $620 million, euro-denominated stablecoins account for around 0.2%, according to figures from the Bank of Italy.

A report by Deutche Bank noted the US Treasury’s willingness to issue more T-bills enables rapid growth in US dollar-backed stablecoins. Combined with the adoption of dollar-based stablecoins in emerging markets, where they take the place of local deposits and cash, it stated: “countries should adopt stablecoins or risk being left behind.”

Domestic sources of demand are likely especially welcomed by the ‘America first’ Trump administration, as they reduce the US government’s reliance on foreign creditors. The chart shows China reduced its holdings by $23.8 billion but this understates the country’s withdrawal. In 2011, China owned 12.9% of US debt ($1.3 trillion); in 2024, Chinese ownership stood at 2.14% ($768 billion), according to US Treasury data.

Other national economies – many still struggling with inflation and low growth – would likely welcome a new means of financing their debt.

Stablecoin use is already rising

Stablecoin use has soared since July 2014, when the first stablecoin, BitUSD, was released. Tether followed a few months later and, though its predecessor has fallen into obscurity, USDT processed more than $1 trillion per month in the year to June 2025, according to data from Chainanalysis.

As governments move to provide legislation around the technology, the greater regulatory clarity means stablecoins will likely see further implementation in areas such as cross-border business-to-business (B2B) payments, digital asset settlement, and on-chain liquidity management.

There has already been massive growth in the use of stablecoins, with transaction volumes up 14-fold since 2020 and the number of transactions increasing more than 21-fold.

Tether’s USDT remains the largest coin by market capitalisation, comprising 61% of the value stored in all stablecoins as of 12 September 2025, according to data from DeFiLlama and CoinGecko. This marks a drop from its 74% market share in March 2021, as Circle’s USDC has grown from 20% to 26% over the same period and other stablecoins have come online.

The state of stablecoin legislation in the UK

The UK has consulted on both systemic stablecoins, via the Bank of England’s discussion paper in November 2023, and non-systemic through the Financial Conduct Authority’s (FCA) consultation paper in May 2025. The regulatory attitude has been guided by the “same risk, same regulatory outcome’ principle: if a stablecoin acts like money in a systemic retail context, it must be regulated like a payment system; if it’s lower scale and less systemic, it falls into a tailored regime designed by the FCA.

The Bank of England has proposed a limit on stablecoin ownership of £20,000 for individuals and £10 million for businesses. Such limits are not found in the US or EU and have received pushback from industry.

In an article by the Financial Times, Riccardo Tordera-Ricchi, director of policy and government relations at The Payments Association, says, “Limits make no sense. Just as there are no limits on cash, bank accounts, or e-money, there is no reason beyond scepticism to impose limits on stablecoin ownership.”

On 10 November 2025, the Bank published a consultation paper suggesting retailers and cryptocurrency exchanges could be exempted from the £10 million limit on businesses.

Many in the UK payments industry and media have criticised the government for moving slowly on legislation. Lord Livermore pushed back on this, noting the US has only provided a legal framework for stablecoin regulation. US regulators are not expected to publish legislation until mid-2026, with a backstop date of January 2027.

The UK government published draft legislation in April 2025, with final legislation expected by the end of the year. The FCA’s consultation on the details of the regime are in its advanced stages, with detailed rules and requirements expected next year.

Key takeaways for payment leaders

Stablecoins are moving from the periphery into the core of global payments infrastructure, creating both opportunities and strategic risks. Their evolution now shapes liquidity, regulatory priorities, and competitive positioning across the industry. Leaders should take note of five shifts that will define the next phase:

Regulation is rewriting the competitive map. Clear frameworks in the US, EU and Asia are unlocking commercial use cases at scale. Firms that adapt early will secure privileged positions in emerging value chains.
Settlement speed becomes a battleground. Stablecoins set a new benchmark for near-instant movement of value. PSPs and banks that cannot match this will see pressure on margins and customer expectations.
Liquidity dynamics will change. As issuers increase their holdings of short-dated government debt, stablecoins are becoming a material force in global liquidity flows.
New operating models will emerge. From programmable treasury workflows to AI-driven payment initiation, stablecoins will underpin a wave of automation that reshapes cost structures and service design.
The strategic question is no longer “if” but “how”. Every institution will need a position on stablecoin issuance, settlement, acceptance, custody, or integration into existing rails.

The message is clear: stablecoins are becoming foundational to the next era of payments. Organisations that understand these shifts now will be the ones shaping the future rather than reacting to it.

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