LONDON — Britain’s financial watchdogs have been on a crypto journey — with a little help from Donald Trump. 

The Bank of England publishes its long-awaited rules for stablecoin Monday. Two years after the central bank’s Governor Andrew Bailey dismissed the virtual currency — a theoretically more stable form of crypto — as “not money,” its rulebook is now expected to get a cautious welcome from an industry that’s been lobbying hard for a rethink.

It would mark quite a shift from the U.K. central bank.

Stablecoins “are not robust and, as currently organized, do not meet the standards we expect of safe money in the financial system,” Bailey told a City of London audience in 2023. 

Now his top officials herald a “fabulous opportunity.” 

The Bank chief’s initial position — that he doesn’t see stablecoins as a substitute for commercial bank money — has put him at odds with the U.K. Treasury, which is on an all-consuming mission to get the sluggish British economy moving. Chancellor Rachel Reeves wants the U.K. “at the forefront of digital asset innovation.” 

The United States crypto lobby, fresh from several wins stateside, spied an opportunity. Exploiting those divisions — and pointing to a more gung-ho approach from Trump’s U.S. — has allowed firms to push for a British regime that more closely aligns with their own. 

Monday could be a very good day at the office. 

Treading carefully

Stablecoins are a type of cryptocurrency pegged to a real asset, like the dollar, with the largest and best-known offering being Tether. They’re seen as a more palatable version of crypto, and are used by investors to buy other cryptocurrencies, or allow cross-border payments. 

The pro-stablecoin camp says their development is necessary to improve payments and overseas transactions for businesses and consumers, particularly as cash usage declines and sending money abroad remains clunky and expensive. If done well, a stablecoin could maintain a reliable store of value and be a viable alternative to cash. 

Those more cautious, including the BoE, warn there are risks for the wider financial system including undermining public confidence in money and payments if something goes wrong. 

And stablecoins are not immune to things going wrong: In 2022, the Terra Luna token lost 99 percent of its value, along with its sister token TerraUSD, a stablecoin which went from being pegged to the dollar on a $1-1 TerraUSDbasis, to being valued at $0.4. Tether also fell during that time to $0.95. 

Other central bankers seem to agree with Bailey’s early caution. The Bank for International Settlements, a central bank body, issued a stark warning on stablecoins in June, saying they “fall short” as a form of sound money. 

There are also concerns such coins are used to skirt money-laundering laws, with anti-money laundering watchdog the Financial Action Task Force, warning that most on-chain illicit transactions involved stablecoins.

The EU has tough regulation in place for digital assets. The bloc prioritizes tighter control over the market than the U.S., with stricter rules on capital and operations. 

That’s in stark contrast to the U.S., which passed its own stablecoin regulation — the GENIUS act — earlier this year, which is much more industry-friendly. Donald Trump, whose family is building its own crypto empire, has described stablecoins as “perhaps the greatest revolution in financial technology since the birth of the Internet itself.” 

That’s put post-Brexit Britain in a bind: align with the EU, the U.S., or go it alone? 

“The U.K. is a bit caught,” a former Bank of England official who now works in digital assets said. They were granted anonymity, like others in this article, to speak freely. “It doesn’t have the luxury of completely creating a bespoke regime. It can do, but essentially, no one’s going to care.”

American push

For a Labour government intent on deregulating for growth, aligning with the U.S. was immediately a more attractive proposition. 

Warnings came from the City of London, Britain’s financial powerhouse, that the government would need to embrace crypto and stablecoin for the U.K. to become a global player. Domestic financial services firms wrote to the government calling for it to align its regime with the U.S., talking up “once-in-a-generation opportunity” to establish the future rules for digital assets.  

“Securities are getting tokenized,” said one former Treasury official, now working in the private sector. “Bank deposits are getting tokenized. If we don’t build a regime that is permissive enough [to make the U.K. attractive], then the City’s relevance will diminish as a consequence.” 

For the pro-crypto brigade, the BoE has been the main hurdle in achieving a U.S.-style, free-market stablecoin rulebook. Reform UK leader Nigel Farage, whose party is currently leading in the polls, accused Bailey of behaving like a “dinosaur. 

“The Bank’s really got itself into a twist on this one. From what I understand from people who have been at the Bank, this is coming from the top,” said the former BoE employee quoted above. 

“Andrew Bailey has made it publicly clear for some many months now that he is sceptical about the two new alternative forms of money, which is stablecoins and central bank digital currencies,” said a financial services firm CEO. 

In recent weeks, however, Bailey and his colleagues have softened their rhetoric as well as indicating a relaxed policy is forthcoming. 

Sarah Breeden, Bailey’s deputy governor for financial stability, has repeatedly said any limits on stablecoin will be temporary, and recent reports suggest there will be carve-outs for certain firms. Other BoE officials have also backed away from tougher rules on the assets which must be used to underpin the value of a stablecoin. 

A second former BoE employee, who now works in the fintech industry, said Bailey was “under a huge amount of pressure, from the government and the industry. He is worried about looking like he is just anti-innovation.” 

The BoE declined to comment. The Treasury did not respond to a request for comment.

US interest 

A state visit by Trump to the U.K. this fall appeared to help shift the debate.  

In late September, the Trump administration and the British government agreed to explore ways to collaborate on digital asset rules. 

Treasury Secretary Scott Bessent and Reeves announced that financial regulators and officials from the U.S. and U.K. would convene a “Transatlantic Taskforce for Markets of the Future.” 

During Trump’s visit, Bessent held a financial services roundtable in London with key figures from industry. “There was a steady slate of crypto attendees there, and the discussion predominantly focused on stablecoins,” said the former Treasury official. 

“Rachel Reeves met Scott Bessent and seems to have been told, actually, we’d like you to be much more supportive of … digital assets,” the financial services CEO added.  

The U.K. Treasury has been “pretty proactive” in taking meetings with crypto firms and traditional finance firms interested in crypto, in the New York consulate and British embassy in Washington, added the former Treasury official.  

The BoE too met with the crypto industry and U.S. politicians, with Breeden at the helm of discussions while she was in the U.S. in October for IMF-World Bank meetings, in an effort to better understand U.S. stablecoin rules. 

Last month saw a major olive branch. 

A Bailey-penned op-ed in the Financial Times saw the Bank chief recognize stablecoins’ “potential in driving innovation in payments systems both at home and across borders.”  

Going further still, Breeden told a crypto conference just this month that synchronization between the U.S. and the U.K. on stablecoin marks a “fabulous opportunity.” 

She has heavily indicated there will be more than a slight American influence when she announces the proposals on Nov. 10. “It’s a fabulous opportunity, to reengineer the financial system with these new technologies,” Breeden told the Nov. 5 crypto conference. 

“I think a lot of people have observed that it was the U.S. crypto firms that really pushed the dial on getting political will, whereas British firms haven’t been able to secure that,” the former Treasury official said.