UK Government Seeks to Bring Stablecoin Payments Under Finance Regulation, Exempting Them from Crypto Dealing Licence

Stablecoins, digital currencies designed to maintain a stable value by pegging to assets like the US dollar or gold, are poised for significant regulatory shifts in the United Kingdom. The UK government is advancing plans to integrate these digital assets more directly into established financial payment frameworks.

HM Treasury confirmed its intention to incorporate stablecoins into payments regulation, addressing existing overlaps with the broader crypto investments regime. This forms part of the UK's forthcoming updates to its payments framework. New draft legislation now proposes to carve out specific stablecoins from requiring a full cryptoasset dealing license. The government invites public feedback on these proposals until May 22, 2026.

This regulatory development follows the making of The Cryptoassets Regulations 2026 in February 2026. These regulations established a comprehensive UK crypto regulatory regime for qualifying stablecoins. This regime is set to come into full effect in October 2027.

This carve-out aims to simplify compliance for firms offering stablecoin payment services. It ensures that providing these payment functions does not automatically trigger the requirement for a separate cryptoasset dealing or arranging license. The move signals the UK's commitment to modernizing its payments infrastructure, creating a single, coherent framework for both traditional and tokenized payments.

While the proposed amendments target dealing activities, lending and borrowing involving UK qualifying stablecoins will remain within the crypto investments regime if they involve dealing or arranging. The carve-out also currently applies only to UK-issued qualifying stablecoins, with overseas-issued stablecoins remaining under the broader crypto dealing rules for now. Further legislative changes are anticipated, with the government planning a consultation on establishing a unified framework for all payment types, including stablecoins and tokenized deposits. This future consultation will also explore how regulation should adapt to payments conducted by AI agents.

Investors and market participants should monitor the feedback period and subsequent legislative actions closely. These steps will shape the future of digital asset integration into the UK's financial system.