The stablecoin market is dominated by US dollar-backed tokens, but that might change in 2026. The UK Financial Conduct Authority (FCA) has set its sights firmly on stablecoins as a major priority for 2026. In a recent letter to Prime Minister Keir Starmer, FCA Chief Executive Nikhil Rathi outlined plans to support UK-issued stablecoins, particularly those pegged to sterling, while continuing to foster a safer environment for innovation in the financial sector. The FCA is inviting firms seeking to issue stablecoins in the UK to join its regulatory sandbox, with applications open until 18 January 2026. The initiative will enable participants to test products under supervision and contribute to shaping future rules for digital assets. Alongside stablecoins, the regulator intends to accelerate the adoption of artificial intelligence in finance and encourage the tokenisation of traditional assets to improve efficiency and competition. Sterling stablecoins and regulatory innovation take center stage Rathi stated that in 2026, the FCA plans to finalise digital asset rules and advance UK-issued sterling stablecoins. The move reflects a broader strategy to reposition the UK in the digital asset landscape, which has lagged behind the US and the EU. The regulatory sandbox initiative will allow participating firms to shape the future of sterling-pegged cryptocurrencies, giving them early influence over emerging standards. The market for sterling stablecoins remains small, representing less than $6 million of a $308 billion global stablecoin market, which is dominated by dollar-backed tokens, according to DefiLlama. Notably, the Bank of England is also preparing a supervisory framework for payment stablecoins, signalling a coordinated approach across monetary and regulatory authorities. Other growth initiatives form part of the FCA’s 2026 agenda: Unlocking capital investment and liquidity through the private stock market PISCES Supporting retail investment with simplified product information and access Launching the Supercharged Sandbox with Nvidia for AI experimentation Promoting tokenisation of funds in the UK asset management sector Reducing regulatory burdens and streamlining reporting requirements for firms The FCA aims to boost the UK’s global financial standing while ensuring secure, regulated access to digital assets and fintech innovation. Other countries moving toward the same path The UK is not alone in expanding regulated access to digital assets. In the European Union, the MiCA framework began taking effect in mid-2024, setting unified rules for stablecoins and crypto service providers. Its rollout continued through 2025, establishing one of the world’s most complete regulatory systems for tokenized assets. The Monetary Authority of Singapore has outlined stablecoin legislation and is moving toward laws that emphasise sound reserve backing and reliable redemption mechanisms as part of efforts to build a scalable and secure tokenized financial ecosystem. Asia is also stepping up. Hong Kong passed a dedicated stablecoin bill in May 2025, complementing its virtual-asset licensing regime and positioning the city as a regulated cryptocurrency hub. Japan is advancing in parallel, with its Financial Services Agency proposing tighter classification of crypto assets under securities rules, enabling banks to interact more directly with stablecoin structures while improving oversight. Meanwhile, Australia has combined policy with testing, with Treasury consultations and the Reserve Bank’s Project Acacia and wholesale settlement pilots exploring tokenized money across financial institutions. Canada, an early mover, expanded regulated crypto-investment options, including spot Bitcoin ETFs. Collectively, these steps demonstrate a global effort to establish secure, regulated pathways for stablecoins and tokenized assets, thereby paving the way for broader institutional adoption.
Digital Pound Incoming? UK Targets Huge Stablecoin Push in 2026
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