Stablecoins and the race to modernise payments infrastructure

The future of money is being redrawn in real time — and stablecoins are rapidly taking centre stage.

The race to modernise payments infrastructure

In Q1 2025, Coinbase CEO Brian Armstrong captured the zeitgeist in one punchy phrase: “Crypto is eating financial services.”

But behind the soundbite lies a deeper structural shift in how financial infrastructure is evolving, powered by stablecoins and their expanding role in global payments.

Strategic Pivot

Coinbase’s Q1 earnings update showcased this strategic pivot.

While overall revenues fell slightly, stablecoin revenues surged 32% quarter-on-quarter to $298 million, driven largely by USDC’s integration across loans, rewards and decentralised applications.

Far from being a fringe asset class, USDC’s market cap now exceeds $60 billion, a milestone underpinned by institutional adoption and its core role in Coinbase’s international trading venues.

This rising tide reflects a wider trend: crypto-native firms are now positioning themselves as the next-generation financial infrastructure providers.

Financial Infrastructure

Coinbase’s $2.9 billion acquisition of crypto derivatives exchange Deribit marks the latest in a wave of billion-dollar M&A deals in the space, signalling a rush to consolidate capabilities across custody, trading, and payment rails.

As Coinbase CFO Alesia Haas noted, the firm is now “entering a new chapter” in the US, buoyed by court victories and high-level political engagement — including a seat at the White House’s first-ever crypto summit.

But while the US moves toward regulatory clarity, the UK remains at an inflection point.

UK Market

Stablecoin usage in payment acceptance is growing, particularly among merchants looking to diversify beyond card rails and reduce settlement costs.

Providers are increasingly offering services that convert received stablecoins into fiat currency, remitting the funds to merchants at speed — mirroring the efficiency aspirations seen in Open Banking.

Yet despite market demand, the UK’s regulatory framework has lagged behind jurisdictions like the EU, where MiCAR is already being implemented.

That gap may now begin to close.

On 29 April 2025, HM Treasury published a long-awaited draft Statutory Instrument under the Financial Services and Markets Act 2000, which introduces new categories of “qualifying cryptoassets” and “qualifying stablecoins”.

These assets, which must reference fiat currencies and be backed by appropriate reserves, will soon fall within the scope of the UK’s regulated perimeter — but only in certain contexts.

The proposal defines three regulated activities for qualifying stablecoins: issuing, redeeming, and maintaining their value.

Importantly, these apply even if the firm is not based in the UK, so long as it services UK consumers.

The policy intent is clear: to establish territorial reach while preventing market abuse and enforcing disclosure requirements for cryptoasset activities.

Notably, however, HM Treasury has decided not to amend the Payment Services Regulations (PSRs) 2017 to bring stablecoins into formal payments regulation at this time.

This does not preclude their use for payments — but it means that for now, stablecoin acceptance remains outside the traditional regulatory perimeter.

The Financial Conduct Authority (FCA) is now tasked with translating the Government’s framework into detailed rules. On 2 May 2025, the FCA published Discussion Paper DP25/1, which evaluates how lending models involving qualifying stablecoins could reduce consumer risk by mitigating volatility and margin call exposure.

A further round of consultation papers — expected in Q2 2025 — will cover issuance, safeguarding, and prudential considerations, with final rules likely to land in 2026.

For the UK payments ecosystem, this regulatory roadmap represents both a challenge and an opportunity.

As stablecoin usage continues to mature — from cross-border settlements to on-chain consumer lending — the FCA must strike a careful balance between fostering innovation and ensuring market stability.

Ultimately, the UK’s ability to develop a credible, agile regime for stablecoins will determine whether it becomes a global hub for digital finance or cedes ground to faster-moving jurisdictions.