Britain risks regulating itself into irrelevance on digital assets
The contrast between approaches to regulating digital assets in the US and the UK is becoming increasingly hard to ignore, says Lord Ranger
Before travelling to Washington last week, I argued that the future of digital finance will be defined by those who move from intent to execution – and what I found there confirmed that some already have.
On 17 March, the US Securities and Exchange Commission – in coordination with the US Commodity Futures Trading Commission – issued a landmark clarification on the treatment of crypto assets under US law. It did something simple, but profound. It began to draw clear, usable lines – between securities and commodities, between compliant innovation and regulatory risk, and crucially, between uncertainty and confidence. After years of ambiguity, the US is signalling a move away from enforcement-led policymaking towards structured, rules-based clarity. In discussions I had with US SEC Commissioner Hester Peirce and others, the direction was unmistakable: enable innovation, but within defined guardrails.
This is how markets scale. Because we know that capital does not fear regulation – it fears unpredictability and right now, the US is reducing that unpredictability. Meanwhile, back in the UK the contrast is becoming harder to ignore. To be clear, Britain has strong institutional foundations. I appreciate the work of the Bank of England and the FCA reflects serious thinking about financial stability, market integrity, and consumer protection. But increasingly, there is a risk that the UK is signalling caution where others are signalling clarity.
Take stablecoins. Last week’s debate – captured in headlines around the Bank of England potentially restricting self-hosted stablecoins and reinforcing holding limits – has brought into sharp focus a critical issue: proportionality. The Bank’s current proposals include caps of around £20,000 for individuals and £10m for businesses holding ‘systemic’ stablecoins. These are not minor technical measures. They are structural constraints and, notably, they are not mirrored in other major jurisdictions.
Out of step
Indeed, such holding limits have been widely criticised as out of step with global regulatory approaches and potentially damaging to competitiveness. The rationale is understandable – concerns about deposit flight and financial stability. But the effect risks being counterproductive. You cannot build globally relevant digital financial infrastructure while simultaneously capping its usability. Nor can you expect firms to choose the UK as a base if core product design is constrained at the regulatory level. This is the emerging divergence.
This concern is not mine alone. The House of Lords Financial Services Regulation Committee has itself raised questions about whether the UK’s emerging regulatory framework for digital assets strikes the right balance between stability and competitiveness – a question that deserves a clearer answer from the Treasury and regulators than has yet been provided.
The contrast is stark. In the US, there is now clarity on classification, coordination between regulators, and a visible – if imperfect – pathway for builders. In the UK, by contrast, consultations remain without conclusion, caution without calibration, and constraints without global alignment.
Even within the Bank of England, there are signs of reflection. Officials have indicated openness to revisiting these limits following industry pushback. That is welcome.
Because the real question is not whether to regulate – but how.
If the UK leans too far into restriction – whether through holding caps, overly conservative reserve requirements, or limitations on self-hosted wallets – it risks creating a system that is safe, but sidelined
The transition to a digital financial system is now underway. The question is who shapes it. If the UK leans too far into restriction – whether through holding caps, overly conservative reserve requirements, or limitations on self-hosted wallets – it risks creating a system that is safe, but sidelined.
And in global finance, sidelined is the same as irrelevant. There is another path.
One that maintains the UK’s commitment to stability and trust, but matches it with competitiveness and clarity. One that recognises that innovation does not thrive in regulatory vacuums – but neither does it thrive in regulatory overreach. And one that aligns more closely with partners like the United States, where momentum is now clearly building.
This is not about choosing between safety and growth. It is about understanding that, in digital finance, the two must go hand in hand. That means the Treasury and the FCA must now move – not just consult. It means the Bank of England should revisit holding caps with global competitiveness, not just domestic stability, as the benchmark. And it means Parliament must continue to scrutinise whether our regulatory framework is genuinely fit for a digital age. We need to get this right if the UK is to do more than just participate in the future of finance. Especially if we want to help define it.
Lord Kulveer Ranger is president of the UK-US Digital Assets Alliance, co-chair Digital Markets Digital Money APPG