UK sprint finds stablecoins best for cross-border payments

The Financial Conduct Authority ran a policy sprint in March that tested practical uses for stablecoins. The event included banks, payment firms, stablecoin issuers and other industry participants. The FCA published the findings after the exercise.

Participants found that stablecoins provide their clearest near-term benefits for cross-border transfers. The report notes cost reductions and faster settlement as the main advantages, especially on corridors serving emerging markets or countries with limited access to US dollars. In major payment corridors where existing systems already move money quickly and cheaply, participants identified fewer gains.

On domestic retail payments, industry participants judged UK consumers have limited incentive to switch from current methods. Bank transfers, card networks and instant-payment rails in the UK were described as already rapid and low cost. The sprint highlighted that merchants could still benefit from lower fees and faster settlement of receipts.

The FCA said the feedback from the sprint informed its June 30 final rules requiring UK-issued stablecoins to be fully backed by reserve assets and redeemable at par. The regulator indicated the evidence will help shape future policy on stablecoin payments and supervision.

Participants flagged several operational and regulatory issues that need attention before stablecoins can be used widely for cross-border payments. These included custody arrangements for reserve assets, redemption mechanisms and interoperability with existing payment infrastructure. The sprint focused on practical trade-offs and where near-term benefits are most likely to arise.