Stablecoins Across Borders: The UK, the US and the EU Divide

The United Kingdom and the United States have taken an important step towards a shared market for regulated stablecoins. Their Joint Statement on Stablecoins, published through the Transatlantic Taskforce for Markets of the Future, goes beyond the familiar language of regulatory cooperation. It sets out the foundations of a system in which stablecoins issued under one national regime could gain access to the other, provided that both sides are satisfied with the quality of regulation, supervision and reserve protection.

The immediate significance lies in the prospect of UK–US reciprocity. The wider significance is that the statement reveals a growing difference between the transatlantic approach to digital money and the model taking shape in the European Union.

The UK and the US appear willing to treat regulated private money as part of the future financial infrastructure. Stablecoins are not presented merely as instruments for retail payments or cryptoasset trading. They are recognised as possible settlement assets for cross-border transactions, capital markets and tokenised financial instruments.

The EU has taken a different route. MiCA provides a detailed regulatory framework for stablecoin issuance, but it does not offer a general equivalence mechanism through which an issuer regulated in a comparable third country can obtain broad access to the European market. At the same time, the European Central Bank continues to favour central bank money as the principal settlement asset for tokenised wholesale markets, with tokenised commercial bank deposits occupying a stronger position than privately issued stablecoins.

The result may be more than a difference in regulatory technique. It could determine where stablecoins are able to circulate, which assets become the cash leg of tokenised transactions, and how easily future financial markets can operate across borders.

From regulatory dialogue to market access

The UK–US statement was issued under the Transatlantic Taskforce for Markets of the Future, announced during President Trump's state visit to the UK in September 2025. Its stated purpose is to promote convergence where appropriate and give firms greater confidence when developing cross-border financial services.

Much of the statement deals with familiar prudential concerns. Stablecoins represented as money should be backed at least one-to-one by high-quality liquid assets. Reserve assets should be segregated from the issuer's own funds. Holders should have clear redemption rights and protected claims in the event of insolvency. Governments should also establish predictable arrangements for cross-border failures and resolution.

These requirements matter because regulatory recognition cannot rest on political goodwill alone. A stablecoin circulating across two major financial markets must offer credible protection to holders in both. Regulators need confidence that reserves exist, that they remain liquid under stress and that customers are not left competing with ordinary creditors if an issuer fails.

The statement nevertheless pays equal attention to commercial viability. The two governments say that reserve and liquidity requirements should not result in excessive ring-fencing of assets in each jurisdiction. They also reject disproportionate requirements that create unnecessary barriers to entry, undermine competition or make cross-border operations uneconomic.

This is an important point. A stablecoin may be legally recognised in several countries but still fail to function as a cross-border instrument if its reserves must be divided into separate national pools. Extensive localisation can weaken fungibility, trap liquidity and force issuers to duplicate operating structures.

The UK and US are therefore trying to reconcile two objectives that do not always sit comfortably together. They want national authorities to retain effective supervision, while allowing stablecoin arrangements to operate across borders without being broken into disconnected local businesses.

The GENIUS Act provides the route

The US framework gives the joint statement added weight because it already contains a mechanism for foreign stablecoin issuers.

Section 18 of the GENIUS Act permits conditional access where a foreign issuer is supervised under a regime that the US Treasury considers comparable to the American framework. The issuer must also register with the Comptroller and satisfy requirements concerning reserves, liquidity, sanctions and anti-money laundering controls.

The legislation does not create an automatic passport. A foreign issuer cannot enter the US market simply because it holds a licence in its home country. The Treasury must assess the foreign regulatory and supervisory system, acting on recommendations from the Stablecoin Certification Review Committee. It must then publish a justification explaining why the overseas framework is comparable.

This is better understood as managed recognition.

Comparability does not require two regimes to use identical rules. It requires confidence that they achieve sufficiently similar outcomes in the areas that matter: reserve quality, redemption, governance, supervision, enforcement, financial crime controls and protection of holders.

The Act also allows the Treasury to enter reciprocal arrangements with jurisdictions that maintain comparable regimes. Such arrangements may reduce the need for local reserve requirements where authorities are satisfied that liquidity and supervisory protections remain adequate.

The connection with the UK–US statement is clear. The statement identifies the political objective; the GENIUS Act supplies a possible legal route for implementing it.

If the UK regime meets the US comparability test, a British-regulated issuer could obtain access to the American market without rebuilding its entire operation under a second, unrelated framework. The UK could provide corresponding treatment to eligible US issuers. Neither side would abandon domestic supervision, but each would accept that the other could produce equivalent regulatory outcomes.

That would be a significant development in digital financial regulation. Many international financial services operate through local authorisation, subsidiaries and duplicated capital or liquidity requirements. A stablecoin recognition arrangement could offer a more integrated model.

There are, however, difficult questions to resolve.

The two countries will need to determine how much local reserve maintenance remains necessary, which authority supervises cross-border activity and how information is shared during periods of stress. They must also establish how holder claims are treated where an issuer, reserve custodian and customer are located in different jurisdictions.

Recognition will also need a clearly defined scope. Retail circulation raises different concerns from wholesale settlement. A stablecoin used by regulated institutions to settle tokenised securities may not require the same protections as one widely held by consumers. A workable arrangement may therefore develop in stages rather than appearing as a complete transatlantic passport from the outset.

Europe has no equivalent bridge

MiCA has given the EU one of the most developed statutory frameworks for stablecoins. It regulates asset-referenced tokens and e-money tokens, sets requirements for issuers and reserves, and gives supervisors powers over instruments that reach significant scale.

What it does not provide is a general equivalence route comparable to the emerging US model.

A non-EU issuer cannot obtain broad access to the European market solely because its home jurisdiction applies rules considered comparable to MiCA. In practice, EU issuance and distribution depend on the presence of an appropriately authorised entity within the Union and compliance with the European framework.

That choice reflects legitimate concerns. Stablecoins can move rapidly across borders, while their reserves, governance and redemption arrangements may remain concentrated elsewhere. European authorities want direct oversight of firms whose instruments circulate within the single market. They are also concerned about the possible effects of large foreign-currency stablecoins on monetary sovereignty and financial stability.

The absence of an equivalence mechanism nevertheless has consequences.

A UK- or US-regulated issuer seeking substantial EU activity may need a separate European structure, local governance, authorisation and additional reserve arrangements. The token may carry the same brand and economic purpose, but its legal form and backing could differ between markets. That reduces the prospect of a single instrument moving seamlessly across the UK, US and EU.

It also raises a broader question. If the UK and US develop a credible system of reciprocal recognition, will the EU eventually need its own controlled route for third-country issuers?

Such a route would not require Brussels to accept foreign regulation without scrutiny. It could include strict conditions, supervisory cooperation, local representation and withdrawal of recognition where standards deteriorate. The relevant issue is whether comparable foreign regimes should ever provide a basis for access, or whether full EU authorisation should remain the only realistic route.

A place for private money in settlement

The clearest signal in the joint statement concerns the intended use of stablecoins.

The UK and US support their integration into payments, settlement and tokenised financial markets. The statement also refers expressly to their use as settlement instruments in securities and commodities markets, subject to appropriate safeguards. Providers of lawful, regulated digital-asset services should have fair, risk-based access to financial services and markets.

That language places stablecoins within the architecture of financial markets rather than at their edges.

In a conventional securities transaction, the asset and cash legs are often processed through separate systems and at different speeds. Tokenised markets seek to bring both sides of the transaction onto compatible infrastructure. For that model to work, market participants need a digital form of money capable of moving with the tokenised asset.

There are several candidates. Central banks can provide tokenised central bank money. Commercial banks can issue tokenised deposits. Non-bank firms can issue fully reserved stablecoins. Each carries a different legal structure, risk profile and regulatory treatment.

The UK–US statement does not declare that stablecoins should replace other forms of money. It supports coexistence between stablecoins, tokenised deposits and public money. But it leaves the choice of settlement asset largely to the market, provided that the instrument is properly regulated.

That position reflects a broader confidence in private-sector payment innovation. Public authorities define the standards, supervise issuers and protect the integrity of money. Private firms compete to provide the instruments and services used by businesses and investors.

The practical effect could be considerable. A qualifying stablecoin might be used to settle a tokenised bond, move collateral outside normal banking hours or complete a cross-border transaction without relying on several correspondent banks. Its value would come not only from speed, but from its ability to circulate across platforms and jurisdictions.

The settlement-layer divide

The ECB's position starts from the importance of central bank money. In conventional financial markets, central bank money provides the safest settlement asset because it does not expose participants to the credit risk of a private issuer. The Eurosystem wants that role to continue as financial assets move onto distributed-ledger and tokenised infrastructure.

Tokenised deposits may also form part of this system. They remain claims on regulated commercial banks and fit within the existing relationship between public and private money. Stablecoins, including regulated e-money tokens, may be permitted in certain circumstances, but they are less likely to become the default cash leg of European wholesale markets.

This creates a clear contrast with the transatlantic direction.

The UK–US statement begins from the premise that several forms of regulated digital money can compete and coexist. It leaves room for stablecoins to become widely used settlement instruments where markets find them efficient.

The European approach begins with the need to preserve central bank money as the anchor of settlement. Private money may complement that foundation, but it should not displace it.

Neither position is irrational. Central bank money minimises settlement risk and supports the singleness of money. Stablecoins may offer wider availability, easier integration with new platforms and greater scope for non-bank innovation. Tokenised deposits preserve the role of commercial banks but may be less portable across institutions and borders.

The real difficulty emerges when these models meet.

A tokenisation platform operating in London and New York might settle transactions using a regulated stablecoin recognised in both markets. The same platform in the EU may need to connect to central bank money or a bank-issued tokenised deposit. Firms could face different settlement processes, liquidity pools and operating hours depending on where a transaction takes place.

That fragmentation could weaken some of the expected benefits of tokenisation.

The technology is often presented as a means of bringing assets, payments and collateral onto interoperable systems. Yet the market may remain divided if the money used for settlement cannot move easily between jurisdictions or platforms.

Commercial consequences

Stablecoin issuers have the most obvious interest in the emerging arrangements. Reciprocity could give them access to a much larger market without requiring a fully separate business in every country. It could also allow reserve assets to be managed more efficiently and support a genuinely fungible instrument across the Atlantic.

Banks face a more complicated position. Stablecoins compete with some banking services, particularly deposits, payments and transaction settlement. At the same time, issuers depend on banks for reserve custody, cash management and access to payment systems. Banks may also issue their own tokenised deposits or provide infrastructure connecting several forms of digital money.

Their strategic decision is not simply whether to support or oppose stablecoins. It is whether to provide the settlement asset, the reserve infrastructure, the distribution channel or the platform connecting them.

Trading venues and tokenisation providers may need to accommodate several forms of cash. A platform could support central bank money for some transactions, tokenised deposits for others and regulated stablecoins where cross-border reach or continuous availability is important.

This flexibility has advantages, but it also increases operational complexity. Each instrument carries different redemption rights, insolvency treatment, liquidity characteristics and supervisory requirements. A transaction settled with a tokenised deposit is not legally identical to one settled with a stablecoin, even where both maintain a value of one pound, dollar or euro.

Asset managers and corporate users will therefore need to look beyond the speed of settlement. They must consider who issued the instrument, where its reserves are held, what happens during an insolvency, whether it can be redeemed immediately and whether it remains usable in another jurisdiction.

The winning settlement asset may not be the one with the most advanced technology. It may be the one recognised by the greatest number of regulators, financial institutions and market infrastructures.

What happens next

The most ambitious outcome would be a genuine UK–US recognition arrangement. Qualifying issuers could operate across both markets under coordinated supervision, with limited additional localisation and a common understanding of reserve and holder-protection requirements.

A more likely initial result may be conditional recognition. Issuers would gain access, but still face registration, reporting, local liquidity and governance obligations. This would fall short of a passport, although it could still reduce duplication.

A third possibility is the development of separate monetary blocs. The UK and US could build a market centred on regulated private stablecoins, particularly dollar- and sterling-denominated instruments. The EU could continue to organise wholesale tokenised settlement around central bank money and tokenised bank deposits.

Such blocs would not be entirely closed. Firms could build technical bridges between them. Banks and payment providers could offer conversion services. Global platforms could support several settlement assets.

But those bridges would come at a cost. Liquidity would be divided, compliance requirements would multiply and transactions might depend on intermediaries that tokenisation was intended to remove.

The next stage of policy work should therefore address interoperability as seriously as authorisation.

The UK and US will need a common understanding of comparability, reserve treatment, supervision and cross-border resolution. The EU will need to consider how its settlement infrastructure interacts with recognised forms of private digital money outside the Union. International standard-setters may also need to develop principles for movement between stablecoins, tokenised deposits and central bank money.

A market-structure decision

The debate over stablecoins is no longer confined to whether they should be allowed or how reserves should be regulated.

The central questions are now where regulated stablecoins may circulate, whether national authorities will recognise one another's regimes and which form of money will settle tokenised transactions.

The UK–US Joint Statement offers one answer. Private digital money can form part of the financial infrastructure, provided that it is fully backed, redeemable, well supervised and supported by credible cross-border arrangements. The aim is not only to regulate stablecoins, but to make them usable across markets.

The EU is constructing a different model. MiCA permits regulated stablecoins, but the European framework remains more territorial and the Eurosystem's settlement strategy gives central bank money a leading role.

The distinction will shape competition between financial centres. It will influence where issuers establish themselves, where tokenisation platforms launch and which currencies dominate digital settlement.

It may also determine whether tokenised finance becomes genuinely international.

A transatlantic recognition framework could connect two of the world's largest capital markets through regulated private digital money. If other jurisdictions do not develop compatible routes, the future financial system may become faster within each region while remaining divided between them.