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 taken a step toward refining its approach to stablecoin regulation by consulting on a draft statutory instrument (SI) that would exempt certain stablecoin payment services from the scope of the country’s new crypto asset regime. As noted by legal firms Hogan Lovells and Cadwalader, this carve-out is intended to be temporary, remaining in place until dedicated payments reforms are introduced. In practice, it means that stablecoin services used for making payments—rather than investment or trading—would not be subject to the broader crypto rules that are currently being phased in.

This distinction matters for market participants because stablecoins occupy an unusual position: they function as digital payment instruments while also being classified as crypto assets. By proposing this exemption, the UK government acknowledges that applying one-size-fits-all crypto regulation to payment-focused stablecoins could create duplication and uncertainty. Instead, the approach suggests a deliberate sequencing—first avoiding overlap, then addressing stablecoins specifically in future payments legislation.

For observers, the key point is regulatory clarity. The consultation signals how the UK intends to treat stablecoins as a distinct category, separate from general crypto activities. Watching for the final SI and the shape of the forthcoming payments reform will be essential, as these will determine the precise boundary between payment services and crypto asset services.