Global regulators are accelerating efforts to define standards for stablecoins and tokenised deposits as programmable finance moves from concept to commercial testing. While markets such as Singapore, Hong Kong and the United Arab Emirates (UAE) are pursuing rapid pilots, the United Kingdom (UK) is favouring a more measured path, prioritising economic clarity and supervisory structure before digital money scales. At Singapore FinTech Festival (SFF) 2025, Nicole Sandler, head of corporate and regulatory affairs at the Centre for Finance, Innovation and Technology (CFIT), said the UK’s agenda is driven not only by financial-stability considerations but also by a desire to anchor long-term competitiveness, with stablecoins increasingly viewed as part of the country’s broader economic strategy. She outlined how the UK’s model diverges from other global regimes and the operational tensions regulators and issuers must reconcile as adoption grows. CFIT, created following the UK’s 2021 Kalifa Review (which focused on scaling the UK’s fintech sector), convenes policymakers, banks and fintechs to test emerging frameworks and ensure supervisory intent translates into operational reality. Sandler noted that the centre’s coalition models — now being explored for digital money — will be essential as the UK moves toward implementation and begins integrating public- and private-sector innovation at regulatory scale. Stablecoins and tokenised deposits Sandler said global markets are in a “pivotal rather than actual” year for digital-asset infrastructure. For the UK, she argued, the real inflection point will come in 2026 as the market finalises its regulatory regime for stablecoins. Although often grouped together as private forms of digital money, the instruments rest on fundamentally different structures. Stablecoins sit outside the banking system, backed by reserve assets whose quality and liquidity determine their stability. Tokenised deposits, by contrast, remain commercial-bank liabilities and maintain the same prudential and conduct treatment as traditional deposits, even when issued on distributed ledgers. These forms of money, Sandler said, will ultimately coexist much as payment schemes do today. “You might use Visa, Mastercard and Amex for different reasons. These forms of money will be the same,” she said. Digital infrastructures will mirror this interplay between public and private rails, similar to the coexistence of RTGS systems and card networks. In the UK, regulatory policy is beginning to take shape. “The UK has been slower in their approach [to regulation]... They wanted to understand the space more and look to other regimes,” Sandler noted. Consultation on tokenised-deposit rules is expected as the UK’s Digital Securities Sandbox (DSS) generates more data from live experiments. Launched in 2024 and overseen jointly by the FCA and the Bank of England, the DSS allows firms to test tokenised securities and DLT-based market infrastructure within a controlled supervisory environment. Alongside the DSS, the Bank of England’s 10 November consultation paper proposed a dual-track supervisory architecture governing stablecoins and tokenised deposits, with the Bank managing systemic arrangements and the FCA regulating non-systemic activity. The paper further highlighted the need to establish clear prudential, redemption and operational standards for systemic stablecoin issuers. Following the Bank’s paper, the FCA this week opened applications for a stablecoin-specific cohort within its regulatory sandbox. In addition, the UK government’s “Supercharged Sandbox” in partnership with Nvidia, announced in June, will expand experimentation with AI-enabled infrastructure — signalling a broader UK effort to modernise market plumbing in parallel with its digital-money regime. A stability-first design for digital money Referring to the Bank of England’s consultation, Sandler highlighted three principal weaknesses that will shape the viability of sterling-denominated stablecoins at scale: unclear thresholds for systemic designation, economic-viability challenges created by unremunerated reserves, and operational uncertainty around proposed holding limits. The split between the Bank of England and the FCA remains a distinctive feature of the UK approach. While the structure could support innovation among smaller issuers, Sandler warned that undefined systemic-designation thresholds create uncertainty. “You have to be very clear about how these two regimes work together… at the moment it isn’t clear,” she said. Under the consultation, systemic sterling issuers must hold 40% of reserves as unremunerated deposits at the central bank, with the remainder invested in short-dated gilts — a model Sandler described as “almost a tax on the issuer”. The unremunerated slice, she warned, undermines economic viability for multi-market firms. Proposed holding limits — GBP 20,000 ($26,400) for individuals and GBP 10 million ($13.2 million) for institutions — raised similar concerns. Regulators frame these caps as a stability safeguard, but Sandler questioned their operational logic: “What happens to the balances that exceed the cap?” Unlike central banks, private issuers cannot modulate supply in real time, meaning mechanisms that work in a central bank digital currency (CBDC) context do not translate easily to privately issued stablecoins. Even so, she noted several strengths in the regime, including allowing stablecoin issuers to hold settlement accounts at the Bank of England — a “really novel idea”, she said, that could materially reduce counterparty risk in digital-money flows. Diverging global models and the risk of fragmentation Sandler said global approaches to regulating private digital money are diverging sharply. “All policymakers are trying to build the same house, but the house has different floor plans,” she remarked — and differences are widening across reserve models, redemption rules and settlement design. Redemption timelines, she added, are now a key point of divergence shaping liquidity risk and user confidence. Singapore, under the Monetary Authority of Singapore’s Stablecoin Regulatory Framework (implemented via the Payment Services Act 2019), requires 100% backing in cash, cash equivalents or high-quality liquid assets (HQLA) and mandates redemption within five business days. Like the UK, Singapore prohibits issuers from earning interest on reserves, meaning economics depend on fees rather than yield. Hong Kong, under the Stablecoins Ordinance and the Hong Kong Monetary Authority’s forthcoming supervisory guidelines for fiat-referenced stablecoin (FRS) issuers, has proposed a conservative but issuer-neutral model requiring 100% HQLA backing, full remuneration on reserves and redemption at par. The European Union’s Markets in Crypto-Asset Regulation (MiCA) regime allows issuers of fiat-referenced e-money tokens to earn interest on the full reserve pool and requires redemption at par value at any time, though without specifying a redemption timeline. The United States (US) remains fragmented. New York, under the New York State Department of Financial Services’ 2022 Guidance on the Issuance of US Dollar-Backed Stablecoins, mandates redemption within two business days and full backing in cash, cash equivalents or short-dated Treasuries. The federal GENIUS Act — pending enactment — requires full backing and redeemability but leaves redemption-timing rules to implementing regulations. The UAE is taking a pilot-led path. In Abu Dhabi Global Market (ADGM), the Financial Services Regulatory Authority’s Fiat-Referenced Tokens Framework requires fully backed HQLA reserves and redemption at par. In Dubai, the Virtual Assets Regulatory Authority (VARA) permits only pilot deployments under its MVP/FMP supervisory phases, with detailed backing and redemption standards to be finalised in later regulatory stages. Sandler warned that such divergence raises operational risk for cross-border issuers and could impede interoperability. Minimum standards, mutual-recognition frameworks and neutral clearing layers will be essential. “There needs to be universal acceptance, universal redemption, and a neutral layer to clear them… without that, interoperability becomes a challenge, and that defeats the purpose of tokenisation." Interoperability also matters within the UK. Sandler noted that without mechanisms enabling par-value transfers between stablecoins, tokenised deposits and a future digital pound, domestic flows will remain fragmented. Comparing this to the universal redeemability of travellers’ cheques, she said digital money will require similar acceptance and redemption frameworks. Global bodies such as the Global Financial Innovation Network (GFIN) are well positioned to support minimum-standards setting. Towards multi-asset wallets and programmable liquidity SFF discussions, Sandler said, reflected growing institutional focus on real, high-value use cases — intraday liquidity management, automated treasury flows, multi-asset portfolios and cross-border settlement. One of the most significant long-term shifts will be the evolution from single-purpose accounts to multi-asset wallets capable of holding tokenised deposits, stablecoins, fiat balances and money-market funds. As with smartphones, fragmented services will converge into unified, programmable interfaces. Treasury management remains the most frequently cited institutional use case, driven by potential efficiency gains in intraday liquidity, cash consolidation and sweeping operations. Stablecoins and tokenised deposits will play complementary roles: stablecoins offer portability and programmability, while tokenised deposits mitigate reserve-related risks but require synchronised settlement across distributed ledgers. The road to 2026 As the UK moves toward implementation, the Bank of England and the FCA will continue refining reserve ratios, remuneration models, holding limits and authorisation pathways. CFIT’s work illustrates how the UK is institutionalising public–private collaboration to deliver a coherent regime aligned with technological feasibility and supervisory expectations. “We’re asking regulators to build the plane and fly it at the same time — and it might turn into a rocket,” Sandler said. Yet she remains optimistic. “The digital-asset train has long left the station — it’s not going away. I’m genuinely excited about what’s coming in 2026.” The coming year will determine whether the UK’s stability-first architecture can support a trusted, interoperable digital-money ecosystem capable of integrating seamlessly with the financial infrastructures of the future.
