Global RWA Compliance Landscape Overview: The UK Seeks a Balance Between TradFi and Digital Innovation

On November 10, 2025, the Bank of England announced the long-awaited regulatory framework for stablecoins, allowing systemic stablecoin issuers to invest up to 60% of their reserve assets in short-term government debt. This policy marks a significant shift in the UK's attitude towards Digital Money.

On the same day that the Bank of England announced new regulations, the UK HM Revenue and Customs issued a tax warning letter to cryptocurrency investors, while in an old building in the City of London, a group of bankers and blockchain developers were fervently discussing the future of tokenized pound deposits.

These seemingly contradictory yet coexisting phenomena are a reflection of the current regulatory status of Real World Assets (RWA) in the UK.

This long-established financial powerhouse is striving to find a delicate balance between maintaining financial stability and promoting innovation after Brexit. Bank of England Deputy Governor Sarah Breeden stated that the UK will seek to align its stablecoin regulatory framework with that of the United States to alleviate concerns about the UK's regulatory progress lagging behind.

I. Regulatory Turning Point: The Far-Reaching Implications of the UK Stablecoin Framework

On November 10, 2025, the Bank of England released the long-awaited regulatory framework for stablecoins, allowing systemic stablecoin issuers to invest up to 60% of their reserve assets in short-term government debt, while setting an individual holding limit of £20,000 and a corporate limit of £10 million.

This policy marks a significant shift in the UK's attitude towards Digital Money.

What is even more intriguing is that Andrew Bailey, the Governor of the Bank of England, who had previously been skeptical about stablecoins, has notably softened his stance. The Central Bank has clearly stated that it will adopt a more lenient regulatory approach and will not impose stricter restrictions on the reserve assets that underpin the value of stablecoins.

This policy shift not only provides clear regulatory guidance for the UK's digital asset market but also demonstrates the Central Bank's determination to seek a balance between financial innovation and risk management.

According to the consultation document, new entrants to the market for systemic stablecoin issuers, or those transitioning from FCA regulation, may invest 95% of their reserve assets in short-term UK government debt during the initial stage to support their business viability in the growth phase.

This progressive regulatory approach reflects the pragmatic attitude of UK regulators.

II. The Struggle for Regulatory Autonomy in the Context of Brexit

After leaving the European Union, the UK faces the urgent task of redefining its status as a global financial center. This pressure has prompted the UK to accelerate the construction of a competitive regulatory framework for digital assets.

“Our goal is to support innovation and build trust in this emerging form of Digital Money,” said Sarah Breeden, Deputy Governor of the Bank of England, when discussing the regulatory framework. “But we must maintain public trust in the currency while innovation accelerates.”

This cautious attitude makes the UK more conservative in its regulatory stance compared to the US. However, Deputy Governor Briden also emphasized that the UK will strive to synchronize with the US in formulating stablecoin regulatory rules to alleviate concerns about the lagging pace of regulation in the UK.

The “Financial Services and Markets Act 2023” (FSMA 2023) has become a key piece of legislation demonstrating regulatory autonomy for the UK after leaving the European Union. This act not only establishes a comprehensive regulatory framework for digital assets but also creates a unique “digital securities sandbox” mechanism, allowing businesses to test innovative products in a controlled environment.

The UK regulatory authorities have taken a relatively lenient approach to non-systemic stablecoins. These stablecoins, primarily used for cryptocurrency asset trading, will continue to be regulated by the Financial Conduct Authority (FCA), while systemic stablecoins will be subject to stricter oversight by the Bank of England.

This layered regulatory approach reflects the UK's risk-based regulatory philosophy.

3. The UK Characteristics of Stablecoin Regulation:** Tiered Regulation and Financial Stability**

The UK has adopted a layered approach to the regulation of stablecoins based on systemic importance, which is unique globally. Systemic stablecoins—those that may pose a potential impact on the financial stability of the UK, referred to as “pound-denominated systemic stablecoins”—face stricter regulatory requirements.

According to the consultation document released by the Bank of England on November 10, systematic stablecoin issuers must not only meet reserve asset allocation requirements but also deposit 40% of their assets in interest-free accounts at the Bank of England.

For new issuers entering the market, this ratio can be relaxed to 5% during the initial phase, allowing for a certain adjustment period.

To ensure that the traditional banking system does not face excessive deposit outflow pressure during the transition period, the Bank of England proposed to implement a limited cap on systemic stablecoins—£20,000 for individual users and £10,000,000 per account for business users.

These limits are expected to be gradually lifted as the financial system adapts to new forms of currency.

However, tiered regulation has also sparked discussions about the fairness of market competition. Varun Paul, the Head of Digital Assets at Fireblocks, pointed out that the proposal from the Bank of England is a “missed opportunity,” believing that the UK could have set the standard for global stablecoin regulation.

Small stablecoin issuers face a clear competitive disadvantage as they are unable to access the support of Central Bank liquidity arrangements.

“The requirement for 40% of non-interest-bearing assets will severely erode profitability,” said a founder of a UK stablecoin startup who wished to remain anonymous. “This is essentially paving the way for large institutions.”

IV. Tightening of Tax Regulation: ** New Requirements under the CARF Framework

The UK HM Revenue and Customs is significantly strengthening its regulatory efforts regarding tax compliance for crypto assets. Starting from January 1, 2026, the UK will officially implement the Crypto Asset Reporting Framework (CARF) established by the OECD, requiring crypto asset service providers to complete self-certification processes for new clients.

The more important change is in international tax cooperation. According to CARF requirements, the UK will automatically exchange information on cryptocurrency transactions with approximately 70 jurisdictions worldwide. Cryptocurrency service providers must complete their first round of reporting by May 31, 2027, although compliance requirements have been in effect since January 2026.

This global tax transparency initiative aims to address the cross-border tax challenges posed by crypto assets. The UK HM Revenue and Customs will obtain user transaction data directly from domestic and foreign cryptocurrency exchanges, significantly enhancing its regulatory capabilities.

The Crypto Asset Reporting Framework (CARF) was developed by the OECD and establishes international standards for the automatic exchange of crypto asset information. Crypto asset service providers must submit user and transaction data to HMRC, which will be shared with other jurisdictions to ensure compliance with the framework on a global scale.

V. Positive Exploration of Market Practice: From Theory to Application

Despite cautious regulation, the UK has shown a proactive exploratory attitude in market practices. UK regulators have created a limited experimental environment for RWA tokenization through tools such as the “Digital Securities Sandbox.”

This mechanism allows regulators to observe the performance of new products and services in a real but controlled environment, thereby formulating rules that are more in line with market realities.

At the same time, the UK's Financial Conduct Authority is actively promoting the development of digital asset settlement services. The CT Settle platform by ClearToken will enable institutions to settle cryptocurrency, stablecoin, and fiat transactions using a delivery versus payment model, completing transactions for both parties.

The development of this infrastructure lays the technological foundation for the large-scale application of RWA.

“Our participation demonstrates our leadership in the digital financial sector, and we are building the infrastructure for the future economy in collaboration with leading institutions in the UK,” said Gilbert Verdian, founder and CEO of Quant, when discussing the development of digital asset infrastructure in the UK.

According to industry reports, globally, RWA tokenization has grown by 380% in just three years, reaching $24 billion. The UK is seeking to secure a favorable position in this global trend.

**6. The Positioning of the UK in Global Competition: **A Balance of Prudence and Innovation

The UK faces multiple pressures in the global RWA regulatory competition. Compared to jurisdictions like the UAE that adopt fast licensing strategies, the UK's regulatory approval process is relatively lengthy, which may lead some innovative companies to move to regions with more flexible regulations.

The GENIUS Act passed by the U.S. Senate aims to mainstream stablecoins, while the EU's MiCAR regulation is set to be fully implemented by the end of 2024. These developments highlight the urgency for the UK to solidify its position.

The cautious attitude of the UK contrasts with the more flexible frameworks of the US and Singapore, which are moving forward.

The Bank of England has promised to introduce stablecoin regulations “as quickly as the United States” to alleviate concerns about the UK falling behind its global allies.

This statement indicates that the UK is actively coordinating with international regulatory efforts, focusing on maintaining financial stability while promoting innovation.

However, UK regulators face unique challenges in balancing innovation and risk. Bank of England Deputy Governor Sarah Breeden pointed out that, due to the heavy reliance of the UK mortgage market on commercial bank financing, stablecoins could have potential impacts on the banking system and credit supply.

This cautious attitude reflects the high concern of UK regulators regarding financial stability risks.

VII. The Future Path: Development Path of Digital Pound and Legal Reform

The Bank of England is actively promoting the research and development of the digital pound (CBDC), which could have a profound impact on the tokenization of RWAs.

On one hand, the digital pound can provide a more efficient and secure payment settlement tool for RWA transactions; on the other hand, the introduction of the digital pound may change the competitive landscape of the stablecoin market, posing a certain degree of substitution for privately issued stablecoins.

The UK Treasury will establish a “Digital Markets Director” to coordinate and promote the digitization of wholesale financial market asset issuance, trading, and settlement based on blockchain.

This move indicates that the UK is taking a more coordinated approach to promote the digital transformation of financial markets, creating the necessary infrastructure conditions for the large-scale application of RWA.

In terms of legal reform, UK regulators will also test the use of stablecoin and other payment solutions in the new digital securities sandbox.

This testing environment will provide valuable experience for regulators, helping them to formulate regulatory rules that are more suited to the characteristics of digital assets without affecting overall financial stability.

UK investment firm IG Group recently predicted that with the rollout of new regulated products and settlement infrastructure, the crypto market in the UK could expand by about 20% next year. This forecast reflects a positive response from the market to the regulatory progress in the UK.

The ancient stone walls of the City of London have witnessed centuries of financial changes, and today they are witnessing yet another fusion of tradition and modernity. The balanced approach chosen by the UK on the path of RWA regulation is both a respect for its financial traditions and a rational embrace of the digital future.

With the comprehensive implementation of stablecoin regulatory guidelines in 2026 and the establishment of the crypto asset reporting framework, the path laid by the UK for the large-scale application of RWA may not be as eye-catching as that of some more aggressive jurisdictions, but its prudence and stability may be exactly the growth environment that the emerging field of asset tokenization needs most.

“Regulation is not the enemy of innovation, but the cornerstone of sustainable innovation.” This slogan, hanging in the corridor of the UK Financial Conduct Authority, perhaps best summarizes the philosophical thinking of the UK on the path of RWA regulation. In the global digital finance competition, the UK is writing its own path of reconciliation between the traditional financial empire and the digital age at its own pace.

Source of some information:

· “The Bank of England Launches Consultation on Regulating Systemic Stablecoins”

· The Bank of England plans to exempt proposed limits on corporate stablecoin holdings, while BNY Mellon explores allowing tokenized deposits and blockchain payments.

· “UK Financial Institutions and Six Major Banks Joint Pilot of Tokenized Pound Deposits”

Author: Liang Yu Editor: Zhao Yidan