Stablecoins for payments: UK government has consulted on draft SI exempting such services from scope of new crypto regime pending further payments reform proposals - Hogan Lovells Cadwalader

The UK government has launched a consultation on a draft statutory instrument (SI) that would exempt stablecoin payment services from the scope of the new cryptoasset regulatory regime. This temporary carve-out is intended to remain in place until broader payments reform is brought forward. The move acknowledges that stablecoins used for payments may require a distinct rulebook separate from general cryptoasset regulation.

By creating this interim exemption, the authorities aim to avoid duplicative or conflicting requirements while the wider payments framework is developed. For payment firms and stablecoin issuers, the proposal offers a degree of regulatory clarity, reducing the risk of overlapping compliance obligations. However, the exemption is not open-ended—it is explicitly tied to the upcoming payments reform proposals.

Market participants should monitor the consultation and the Treasury’s subsequent payments framework, as these will shape the long-term licensing and conduct standards for stablecoin-based services. The approach signals the UK’s intent to support innovation in payments while preserving financial stability, but the precise boundaries of future regulation remain to be defined.