The Payment Stablecoins Act has received Royal Assent following its passage through both Houses of Parliament, establishing the United Kingdom as one of the first major economies to create a dedicated legal framework for fiat-backed stablecoins. The legislation, which builds on proposals first outlined in the 2023 Financial Services and Markets Act, grants the FCA authority to supervise stablecoin issuers while giving the Bank of England oversight of systemic stablecoin payment arrangements. Issuers must maintain reserves of at least 100 percent in high-quality liquid assets held with UK-regulated custodians.

The Act distinguishes between three categories of stablecoins: payment stablecoins backed by sterling, foreign currency-denominated stablecoins used in cross-border transactions, and algorithmic stablecoins, which face the strictest requirements including a mandatory £50 million capital buffer. Major players are already positioning themselves to enter the market, with PayPal confirming plans to launch a sterling stablecoin in partnership with Paysafe, while Visa has announced a stablecoin settlement pilot with three UK clearing banks. Industry analysts at Chainalysis estimate the UK stablecoin market could reach £45 billion in circulation within three years of the Act taking effect.

Critics have warned that the legislation may inadvertently create barriers for smaller fintech firms. The compliance burden, including requirements for quarterly reserve attestations by Big Four auditors and real-time redemption capabilities, could cost upwards of £2 million annually. Economic Secretary to the Treasury Bim Afolami dismissed these concerns, stating that "robust standards are the price of admission to a market that handles people's money." The first applications under the new regime are expected to be submitted by September 2025, with initial authorisations anticipated before year-end.