From Wild West to Foundation of Finance: The Case for Public Permissionless Blockchains

Bridging the Atlantic: How the UK and US are Shaping the Future of Stablecoins 2025 - affectionately known to us Owls as the Year of the Stablecoin - has certainly lived up to expectations in the policy stakes.  In the US, President Trump signed the long awaited the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law on July 18, establishing the first federal framework for so-called “payment stablecoins” (seemingly just about any stablecoin). At the same time, the FCA has recently closed its consultation on a regulatory framework for stablecoins in the UK. With these two major jurisdictions finalizing their regulatory frameworks for fiat-backed stablecoins, understanding the differences between their approaches provides insights not just for issuers, but for global market design and those thinking broadly about the potential impacts of a world full of stablecoins in multiple currencies. We briefly compare and contrast key aspects of the two regimes, and suggest what this means in practice. Scene Setting  Both regimes would regulate the issuance of stablecoins and the issuers and intermediaries who support them.  They start with similar definitions of stablecoins:  essentially those fiat-denominated stablecoins that can be used in payments.  Stablecoins linked to other assets are left to other regulation.  We Owls have explained how regulation of these other assets might work, including to the SEC Crypto Task Force and in response to an FCA consultation. One key element mandated by the GENIUS Act and the FCA’s consultation is the requirement that issuers maintain 1:1 backing of their stablecoins with high-quality, liquid reserve assets (essentially cash and cash equivalents). Both approaches also set enforceable standards for who may issue a stablecoin, redemption rights, disclosures, and custody of the backing assets.  Let’s dig a bit into the details, comparing and contrasting the two approaches. Keeping It In Reserve In the US, an issuer’s stablecoins must be backed up one-to-one by eligible instruments, such as: US currency, demand deposits or deposits held at Federal Reserve Banks; Treasury bills or bonds with a maturity of 93 days or less; Funding secured through a repurchase agreement backed by T-bills and cleared at a registered Central Clearing Agency (CCA); Securities issued by a registered investment company or other money market fund; Any similarly liquid federal government-issued assets approved by the issuer’s regulators; and Tokenized versions of eligible instruments that comply with applicable laws. In the UK, an issuer will only be able to hold “core backing assets” for the one-to-one backing, comprised of:  short term deposits, short-term government debt instruments; longer term government debt instruments that mature in over one year; units in a Public Debt CNAV Money Market Fund (PDCNAV MMF); and assets, rights or money held as a counterparty to a repurchase agreements or a reverse repurchase agreements. Both jurisdictions require that the reserves be segregated and not commingled with the issuer’s operational funds.  Verdict: aligned. A Shot At Redemption In the US, customers must have a clear, enforceable right to redeem stablecoins for the reference currency (e.g., U.S. dollars) on demand. The GENIUS Act requires issuers to publish a redemption policy that promises “timely redemption” of stablecoins for fiat, with any fees disclosed in plain language and capped (fees can only be changed with seven days’ notice). Regulators are expected to formalize operational expectations in the required implementing rulemakings. In the UK, the FCA has proposed that any stablecoin holder can redeem directly with the issuer in one business day. It proposes requiring that any fees charged for redemption be commensurate with the operational costs incurred for executing redemption. In all cases fees must not exceed the value of the stablecoins being redeemed, or pass on costs and losses arising from the sale of assets in the backing asset pool. Verdict: to be determined. The FCA’s T+1 proposal is stringent, and more so than other regimes, such as the Markets in Crypto Assets regulation in the EU. Permitting a more flexible redemption timeline could give the US a competitive edge, although the consumer aspect may also be important. What’s The Issue(ance) The GENIUS Act’s general rule is that only U.S.-regulated issuers can directly issue stablecoins to U.S. users, but it creates a possible exception for foreign issuers that meet strict criteria and obtain a form of U.S. approval. Foreign issuers may issue stablecoins in the U.S., and digital asset service providers may offer or sell such issuer’s payment stablecoin, if the foreign issuer: Is subject to regulation and supervision by a foreign regulator that the U.S. Treasury determines is “comparable” to the regulatory and supervisory regime under GENIUS, a determination which Treasury has 210 days to make; Is registered with the OCC; Holds reserves in a U.S. financial institution sufficient to meet liquidity demands of U.S. customers; and The foreign jurisdiction in which the issuer is based is not subject to comprehensive economic sanctions.  In the UK, anyone wishing to issue a qualifying stablecoin must be authorised and regulated by the FCA. However, issuers based overseas, even if they are issuing a GBP stablecoin and/or issuing to UK customers, do not require FCA authorisation, unless they are also conducting another UK-regulated activity. While this allows for a theoretical route for UK customers to access unregulated overseas stablecoins, in practice most UK customers will be relying on intermediaries like a trading platform, which would be in scope of local UK regulation.  Verdict: not aligned.  The UK may have a competitive advantage by allowing foreign issuers more flexibility. No Interest In That Both the GENIUS Act and the UK FCA do not allow stablecoin issuers to pay their holders any form of interest or yield (whether in the form of cash, tokens or other consideration) if it is solely related to holding, retention or use of the coins.  Both are silent on other types of programs such as rebates to intermediaries that might be passed on to consumers. In both instances, it seems that the boundary between prohibited yield and permissible rewards tied to other activity may be subject to future rulemaking and regulatory interpretation. Verdict: aligned What About Implementation? The GENIUS Act becomes effective on the earlier of 18 months after enactment - that is, January 18, 2027, or 120 days after the primary federal payment stablecoin regulators (e.g. Federal Reserve, OCC, FDIC, SEC/CFTC) issue final implementing regulations. Additionally, within 1 year of enactment (i.e. by July 18, 2026), Primary Federal payment stablecoin regulators, The Secretary of the Treasury, and each state payment stablecoin regulator must issue proposed and final rules via notice-and-comment. Three years after enactment (by July 18, 2028) it becomes unlawful for any digital-asset service provider (e.g., exchanges, custodial wallets) to offer or sell payment stablecoins in the US unless those stablecoins are issued by a permitted payment stablecoin issuer under the Act. So what does that actually mean for firms? Market participants have roughly 12 months (until mid‑2026) to prepare for proposed regulatory standards. Full compliance requirements kick in by early 2027, unless regulators finalize rules sooner. Digital-asset platforms must ensure that all payment stablecoins offered in the U.S. are issued by authorized entities by mid‑2028. Up until then, platforms may continue to offer and sell stablecoins that have not been issued by permitted stablecoin issuers. In the UK, assuming the FCA sticks to its 2024 Roadmap, firms can expect final rules published in the first half of 2026, with the regime switching on, at the earliest, late 2026. However, there is likely to be a phased implementation period, with firms who have an existing MLR registration or an existing FSMA authorization treated differently to firms seeking FCA authorization for the first time. If the UK is nimble and decisive, it could match the US’s timeline of full compliance by early 2027. However, given the level of commitment and pace of legislation as demonstrated by GENIUS, it seems inevitable that the UK is going to land its regime after the US.   The View From The Nest While both jurisdictions are moving swiftly to bring stablecoin activity within the regulatory perimeter, their paths diverge in meaningful ways. The UK’s rules reflect a strong focus on financial services oversight and bank-level safeguards, while the US approach is more explicitly centered on payment system stability and state–federal alignment around issuer regulation. Whether this divergence ultimately fosters jurisdictional competition, interoperability or friction will depend on how these rules are implemented - and how responsive they remain to a market still evolving at speed. We intend to host some local invite-only events in various locations around the world in the coming months to learn more about how the experts are thinking about stablecoins and their impacts on payments, banking and the overall digital economy.  We will share the key themes from each event with everyone.

Following the EU’s introduction of MiCA earlier this year and legislative developments in the US with the GENIUS Act, other major jurisdictions around the world are steadily working to put in place clear rules of the road, intended to give both the cryptoasset sector and traditional finance clear guidance on how to make the most of blockchain technology. British politicians and regulators are working hard to develop regulation for the UK’s cryptoasset sector. Following a long-term political commitment to develop the UK into a ‘global crypto hub’, the regulatory pieces are beginning to fall into place to make this happen. When this regulatory framework has been implemented, the UK will (if all goes to plan) have rules that support the steady growth of the sector and innovation in finance and technology - alongside stronger consumer protection and market stability.  In this Owl Explains post we outline the different recent milestones the UK has passed, and look ahead to what is coming next. HM Treasury: Draft Statutory Instrument for a Regulatory Regime for Cryptoassets HM Treasury (the UK government’s Ministry of Finance) published its so-called Secondary Legislation for cryptoassets on 29 April 2025. Secondary Legislation (via a ‘Statutory Instrument’) is a piece of more detailed legislation that follows on from higher-level, overarching legislation that has already been passed by both Houses of Parliament; in this case, comprising the 2023 amendment to the Financial Services and Markets Act (FSMA), which now brings. cryptoassets into UK financial legislation.  The proposed Statutory Instrument defines ‘qualifying cryptoassets’ and ‘qualifying stablecoins’ as regulated ‘specified investments’and brings under FCA oversight key activities such as running crypto exchanges and custody services, dealing, arranging, staking, and issuing stablecoins. The proposal also amends money‑laundering and financial‑promotion rules, and ensures that stablecoins don’t unintentionally fall under other categories like e‑money or collective investment schemes. Decentralized systems without a controlling party are broadly exempt, and there would be a transition period to allow firms to apply for authorisation.  FCA DP 25/1: Regulating cryptoasset activities Shortly after HM Treasury published its proposals for the Statutory Instrument, the UK’s main financial regulator, the Financial Conduct Authority (FCA), published its related Discussion Paper (DP) 25/1 on Regulating cryptoasset activities.  The discussion paper builds on existing financial market rules, proposing that crypto trading venues follow similar standards to traditional trading venues, with strict transparency requirements, conflict-of-interest rules, and protections for retail clients. It also suggests that intermediaries should follow best-execution rules, that payment-for-order-flow is banned, that lending and borrowing to consumers may be heavily restricted, and proposes a prohibition on the purchase of cryptoassets using credit cards. With respect to staking, clear disclosures, customer consent, separate wallets, and liability safeguards are proposed. Truly decentralised systems without a controlling party remain outside the framework, but any service deemed by the FCA to have a central operator would be included.  FCA CP 25/14: Stablecoin issuance and cryptoasset custody Later in May 2025, the FCA launched Consultation Paper (CP) 25/14, proposing rules for the issuance of fiat-referenced stablecoins and the safe custody of cryptoassets. Issuers would need to fully back every stablecoin with high-quality, liquid assets held in a statutory trust via an independent custodian, honor redemptions at par value within one business day, and regularly publish transparency reports on reserves and redemption policies. Meanwhile, crypto custodians would be required to segregate client tokens from their own, maintain accurate records and governance, and hold assets in trust. This adapts established FCA protections from traditional finance for the digital asset sector.  FCA CP 25/15: A prudential regime for cryptoasset firms At the same time as CP 25/14, the FCA published CP 25/15 to propose a dedicated prudential rulebook for crypto firms that issue fiat‑backed stablecoins or safeguard cryptoassets. It proposes two new rulebooks: COREPRU, which covers general capital, liquidity, and risk standards, and CRYPTOPRU, which is tailored to crypto activities. Firms will have to hold the greater of three capital measures: a permanent minimum (£350,000 for stablecoin issuers, £150,000 for custodians), a buffer equal to 25 % of fixed overheads, or an activity‑based “K‑factor” (equivalent to the market value of 2 % of stablecoins issued or 0.04 % of cryptoassets safeguarded). On top of that, liquidity rules require crypto firms to set  aside enough in high‑quality liquid assets to cover short‑term obligations and ensure resilience, plus safeguards on concentration risk to avoid over‑reliance on any single counterparty or asset.  Further proposals by the FCA are expected in the coming months, following its clear and scheduled ‘Crypto Roadmap’. Taken together, the Roadmap aims to build trust and stability in crypto markets ahead of final rules that are expected to be published in 2026. The rules will then come into effect some time in 2027. What does Owl Explains think about these proposals? Owl Explains strongly supports the UK’s efforts to develop its regulatory regime for cryptoassets. As we consistently argue, a clear, stable and proportionate set of rules is needed  - right around the world - to allow the long-term development of blockchain technology and ensure that its benefits can be fully realized. Piece by piece, policy-makers are laying the groundwork for this in the UK.  For us, the key thing is that regulators recognise that infrastructure providers on blockchain networks are not in themselves financial intermediaries, including but not limited to when they use native DLT Tokens to perform technology functions integral to the operation of the blockchain. The recent proposals put forward by HM Treasury and the FCA go some way to acknowledging this, but it will benefit everyone to have that point clarified more explicitly.  You can read Owl Explains’ Response to the FCA’s DP 25/1 here. And be rest assured, as the FCA follows its Crypto Roadmap, we’ll keep on highlighting what it means and making the case for a clear, stable and proportionate regulatory framework for cryptoassets in the UK - and around the world.

What better place to explore the future than a setting steeped in the past? Against the backdrop of the Dorchester Hotel—an iconic London venue rich with history and elegance—the first Owl Explains Crypto Summit brought together a dynamic mix of policymakers, technologists, legal minds, and industry leaders to tackle some of the most forward-looking questions in crypto and digital markets. The turnout was strong, the energy high, and the conversations —both on and offstage — were substantive. This wasn’t a day of soundbites or sales pitches! So in between the delicious food (miniature vegan lemon meringue pie, yes please), getting your new complimentary professional headshot from Van Scoyoc Associates, and enjoying the contents of your OE tote swag - our owlet attendees were able to enjoy a range of panels, delving into topics including privacy, liquidity, global commerce, autonomous code, anti-money laundering and tokenization. Big Picture Perspectives Sprinkled delightfully among our roundtables we were able to hear from three keynote speakers whose leadership continues to shape digital policy at the highest levels: Lord Holmes (UK House of Lords), Peter Kerstens (European Commission), and MEP Ondřej Kovařík (European Parliament). While occupying very different roles in the policy ecosystem, they all spoke to the power of blockchain and digital assets to enhance the global financial world of tomorrow. Lord Chris Holmes emphasized the need for thoughtful regulation of emerging technologies and called for a cross-sectoral AI framework—highlighting both innovation and social inclusivity, especially for sensory-impaired communities. Peter Kerstens, “the father of MiCA”, used his keynote to underline Europe’s new crypto-assets framework and urged developers not to wait for prescriptive regulation, but to innovate, demonstrating in practice how the rules can be shaped and applied. MEP Ondřej Kovařík offered a forward-looking view on MiCA implementation and its broader implications for the European crypto ecosystem, emphasizing the importance of ensuring a smooth and coordinated rollout of the new framework. With those big-picture perspectives anchoring the day, we can now zoom into the practical, the technical, and the sometimes provocative. Across six expert-led roundtable sessions, attendees had the chance to get stuck into the details: asking hard questions, sharing lived experience, and debating what’s really needed to take this industry from potential to practice. Roundtable Session 1: Tokenizing It All The summit’s first roundtable, Tokenizing It All, explored the implications of a fully tokenized world where stablecoins are commonplace with panelists Helen Disney, Sean McElroy, Yuliya Guseva, Jannah Patchay, Varun Paul, Isadora Arredondo, and Kene Ezeji-Okoye. The discussion delved into the fundamentals - what does it mean to tokenize something, the practical challenges and opportunities of tokenizing various asset classes (including Sean’s apartment!), the role of regulation, and the potential impact on commerce and trading. Roundtable Session 2: DeFi-ing Liquidity The second session, DeFi-ing Liquidity, examined the dynamics between decentralized and centralized finance in providing market liquidity. Panelists Fahad Saleh, Lavan Thasarathakumar, Joey Garcia, Dan Gibbons, David Wells, Sara George, and Olta Andoni had an animated discussion, highlighting the benefits and risks associated with DeFi, the need for regulatory clarity, and the future of liquidity provision in a tokenized economy. And even a sprinkling of friendly feather ruffling as the question of definitional prowess between academics and lawyers came to a head! Roundtable Session 3: Globalizing Commerce If the audience were hungry, they weren’t letting it show. The high spirits continued into the final panel of the morning, which addressed the complexities of global commercial structures in the context of tokenized assets. Panelists Yesha Yadav, Erwin Voloder, Scott Mason, Sam Gandhi, Emma Pike, Dagmar Machova, Ari Pine, and Amanda Wick discussed jurisdictional challenges, the convergence of commerce and trading, and the legal implications of cross-border transactions in a blockchain-enabled world. Roundtable Session 4: The Chase is On The afternoon discussions kicked off with a great panel looking into enforcement, litigation, and anti-money laundering in the realm of tokenized and decentralized finance. Our expert panel featuring Justin Gunnell, Christopher Mackin, Sayuri Ganesarajah, Joanna F. Wasick, Laura Clatworthy, Isabella Chase, Joe Hall, and Jesse Overall shared insights on tracking illicit activities, the role of international cooperation, and the evolving legal landscape in digital finance. They also touched briefly on the rise of wrench attacks, which involve real-world violence targeted at individuals for their digital assets - reminding our audience that the digital and physical worlds are now inextricably linked. Roundtable Session 5: When We Need Secrets The fifth roundtable raised some interesting Nuggets (!) on privacy and identity in a fully tokenized and decentralized market. Speakers Seema Khinda Johnson, Dr. Agata Ferreira, Adam Jackson, Eugenio Reggianini, Adi Ben-Ari, Peter Freeman, and Chris Grieco debated the challenging balance between giving citizens control and privacy, and combating fraud. They discussed the development of digital identity solutions, and the ethical considerations of data protection in blockchain applications. Roundtable Session 6: Code Running Solo Last but by no means least, the final session, Code Running Solo, explored the intersection of cybersecurity, artificial intelligence, and autonomous code in tokenized markets. Panelists Lilya Tessler, Norma Krayem, Laura Navaratnam, Fabian Schär, Eva Wong, Joni Pirovich, and Caroline Malcolm examined the challenges of securing decentralized systems, the implications of AI-driven decision-making and the role of regulation (on which opinions differed wildly!) within that.  Looking Ahead: A Community with Purpose As Wee Ming Choon took to the stage to close out the first ever The Owl Explains Crypto Summit, the mood was buoyant, especially for a conference ending after 6pm! This wasn’t just a policy event—it was a community coming together to explore real questions about how our digital future is taking shape.  One topic that kept coming up was regulation. Are regulators getting it wrong because they have turned their back on technology and competition? Or is that a mischaracterization of the role of regulation - and in fact the incentives work against regulators, promoting continuity of the status quo? Our panels on liquidity and autonomous codes in particular discussed this at length - and while this is not a discussion that can be solved easily, creating platforms for smart and articulate individuals with a range of views and experience to debate them can only serve to be a step towards answers. As our Owl Explains parliament retired to the drinks reception, brains fizzing with a heady mix of topics - from tokenization to AI, from privacy to liquidity, all conversations that didn’t shy away from complexity. And that’s exactly what made them so valuable. In the words of Owl Explains founder Lee Schneider, “I came away with a really positive sense that we will change the world.” It was a sentiment shared by many in the room: pride in what’s been built, and excitement for what comes next.