Payments Association Urges Bank of England to Unblock Stablecoin Innovation

The Payments Association (formerly the Emerging Payments Association) has urged the Bank of England (BoE) to ease regulatory pressures that, it says, are slowing progress on stablecoins and digital currency innovation in the UK. The call comes as part of the group’s newly released Payments Manifesto 2026, which outlines policy recommendations for strengthening the UK’s leadership in payments.

Launched at the House of Commons and backed by over 150 payments professionals, the manifesto — titled Making Britain a Payments Powerhouse — proposes 77 policy recommendations spanning regulation, financial crime, open banking, financial inclusion and digital currencies. A key point of contention is the current approach to stablecoin regulation.

While supporting the UK government’s goals for a “safe and effective regime” for digital assets, the Payments Association argues that existing frameworks and procedures are actually stifling innovation, particularly for stablecoins that could play a role in faster and cheaper payments.

What the Payments Association Wants Changed

The manifesto calls for several specific changes in the way stablecoins are regulated:

• Removal of holding limits on systemic stablecoins — which regulators have considered as a way to mitigate financial stability risks.
• Improved backing asset ratios, meaning stablecoin issuers should hold higher quality, more liquid reserves.
• Repeal of wholesale bans that currently restrict certain uses or issuers of stablecoins.

The Payments Association believes that these reforms would help the UK better compete with other global hubs — such as the EU, the US, and parts of Asia — that are moving more quickly to embrace digital currency innovation.

Regulatory Background: BoE’s Stablecoin Regime

The Bank of England and the Financial Conduct Authority (FCA) have been developing a regulatory regime for systemic stablecoins — digital assets widely used for payments that could pose risks to financial stability. This consultation sets out how stablecoin issuers would be recognised as systemically important and supervised under UK law, with a focus on ensuring consumer protection and market integrity.

BoE proposals include requirements for backing reserves, oversight powers under the Banking Act 2009, and limitations on issuing interest to coinholders — aiming to balance innovation with financial stability. However, some industry groups, including the Payments Association and stablecoin firms, view aspects of the proposals — such as temporary holding limits and backing rules — as overly restrictive.

Other industry voices have also criticised the BoE’s approach as “disproportionately cautious”, arguing that the central bank should focus on enabling stablecoins to move into real-world payments more quickly, rather than emphasizing restrictions that could slow adoption.

Wider UK Policy Context

The Payments Association’s manifesto is being positioned against broader UK fintech and digital finance strategies. With the Labour government emphasizing the National Payments Vision and a forthcoming National Fraud Strategy, industry leaders see an opportunity for regulators and policymakers to accelerate progress on digital currencies and payments innovation.

Supporters of stablecoin reform argue that a clear, innovation-friendly framework could help the UK:

• Modernise cross-border payment systems
• Boost competitiveness with other major financial centres
• Enhance the adoption of programmable money in services such as payroll, remittances and real-time settlement

Critics, including some regulatory voices, counter that strong oversight is necessary to ensure financial stability and protect consumers as digital currencies scale in use.

Industry Reactions and Implications

Ben Agnew, CEO of the Payments Association, said the manifesto reflects a demand for “confidence, clarity and collaboration” so that regulatory policy can become practical progress. He emphasised that treating payments — including digital currency innovation — as “strategic national infrastructure” is key to UK growth and resilience.

Meanwhile, MPs such as David Burton-Sampson have welcomed the Payments Association’s advocacy as timely, given the evolving UK payments strategy and the upcoming reforms from government and regulators.

As the UK continues to consult on stablecoin rules — with proposals due to be finalized in 2026 — the debate between innovation advocates and financial stability authorities is likely to continue shaping how digital currencies are positioned within mainstream finance.

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