Stablecoins are now under regulatory fire from the US and UK, with both countries ready to issue new regulations. Corporate treasuries who use, or are thinking of using stablecoins, should be aware of the new changes.
Stablecoins, cryptocurrencies designed to maintain a stable value, are facing increased regulatory pressure in both the US and UK. This heightened scrutiny raises questions about their future and impact on corporate treasury operations. The clear message from regulators is that the largely unregulated environment for stablecoins is coming to an end.
Concerns over systemic risk, consumer protection, and the potential for financial crime are driving this regulatory push. Policymakers are particularly wary of a potential “run” on a major stablecoin, where mass redemptions could destabilize the broader financial system. The sheer size of the stablecoin market, now exceeding $130 billion, amplifies these concerns.
In the US, the regulatory approach is fragmented, with multiple agencies, including the Treasury, SEC, and CFTC, vying for oversight. The Treasury has proposed bank-like regulation, while the SEC views many stablecoins as securities. Meanwhile, Congress is considering various legislative options, creating considerable uncertainty for the industry.
The UK is taking a more unified approach. HM Treasury plans to regulate stablecoins used for payments under existing e-money rules, with the Financial Conduct Authority (FCA) acting as the primary enforcer. The Bank of England is also focused on the systemic risks posed to payment systems.
Dante Disparte, Global Head of Policy at Circle, one of the biggest stablecoin issuers had predicted in October 2024 that the UK would be moving towards stablecoin regulation. After meeting with officials at the Bank of England, Disparte told CNBC that UK stablecoin laws could be implemented in “months, not years.” He noted that initial UK resistance to crypto regulation stemmed from concerns following the FTX collapse and worries about fraud and risk in the crypto space.
For corporate treasury departments, this evolving landscape presents significant challenges. Companies using or considering stablecoins must conduct rigorous due diligence on issuers, verifying reserves and regulatory compliance. The potential for increased compliance costs, stemming from bank-like regulation, could also impact the economics of using stablecoins for cross-border payments.
The future of stablecoins is being actively shaped by regulatory actions. While they offer potential benefits in terms of speed and efficiency, treasury and finance professionals need to navigate this changing environment with caution, prioritizing due diligence and strategic agility.
