Washington Bet on Scale, London Bet on Safety – The Stablecoin Divide
By: Paul Schaus
July 8, 2026
I read a sharp rundown of the U.K.'s new stablecoin rules this week and was struck less by the details than by the contrast. The United States and the United Kingdom have now built stablecoin regimes that start from the same premise — a stablecoin is a way to pay, not a place to earn — and reach almost opposite conclusions about how to enforce it. The divergence is not academic. It will decide where a profitable stablecoin business can be built, whose currency dominates the rails, and how much of its deposit base a U.S. bank should expect to defend. For a bank, this is not a foreign-regulation story. It is a competitive and funding story.
Both the U.S. and the U.K. require a coin to be fully backed, one-for-one. Both bar the issuer from paying interest to holders. Both give the holder a legal right to redeem at par. Both restrict issuance to authorized, supervised entities rather than anyone with a website and a whitepaper. On the fundamentals, London and Washington are reading from the same page.
Then they diverge on everything that actually decides two questions: is it safe, and can anyone make money doing it? The GENIUS Act answers the second question first and trusts the market to handle the first. The Bank of England's regime answers the first question first and lets the second one fall where it may.
The reserve rules tell the whole story. The GENIUS Act requires reserves held entirely in cash and short-dated U.S. Treasuries, 93 days or less with no central-bank component. A U.K. coin judged "systemic" must park at least 30 percent of its backing at the Bank of England, in deposits that earn nothing by design, and may hold up to 70 percent in short-dated gilts. The U.K. is the only major regime that forces a slice of the backing into central-bank cash that pays zero — a run-proofing device that also, deliberately, makes the economics harder. Money you can draw instantly without selling anything into a falling market is money that cannot earn its keep.
The approaches to growth diverge just as sharply. The U.S. sets no ceiling on how large a coin may become; it leans on full backing and the yield ban to contain the risk. The U.K. dropped the per-person holding caps it once floated and replaced them with a temporary £40 billion issuance ceiling on each systemic coin — an explicit brake on how much deposit funding any single stablecoin can pull out of the banking system before regulators understand the effect on credit. One regime trusts the backing; the other distrusts the scale.
Two more differences matter. The U.K. requires a systemic coin's reserves to sit in the U.K., held by U.K. entities and reconciled daily; a foreign issuer that gets big enough must stand up a British subsidiary to keep going. And the regulatory trigger differs in kind. The U.S. runs a bright-line licensing regime across the Treasury, the OCC, and the states. In the U.K., the FCA authorizes every issuer, and then HM Treasury decides by judgment — with no size threshold — when a coin has become "systemic" and hands it to the Bank of England for joint supervision. One country hands you a license. The other hands you a designation you may not see coming.
All three major frameworks — U.S., U.K., and EU — bar the issuer from paying interest. The U.S. version has a hole in it. Nothing in the GENIUS Act stops an affiliated exchange from paying "rewards," so platforms like Coinbase and Kraken route reserve income back to holders as roughly 4 percent on USDC — interest by another name, wearing a costume. Two fights are now underway to close that hole, and the banking industry is on the same side of both. On the regulatory front, the OCC's early-2026 proposal would treat those affiliate arrangements as prohibited unless the firm can prove otherwise, and the crypto exchanges are resisting it hard. On the legislative front — the one that matters more — the yield question actually gets settled in the CLARITY Act's Section 404, where a coalition of every major banking trade group — from the ABA to the ICBA — is pressing the Senate to tighten the text so the prohibition cannot be quietly structured around. As I write this article, that fight is live, leadership is whipping votes, and the anti-evasion edits are aimed at the manager's amendment ahead of a floor vote in the coming weeks. The U.K. and the EU never had this argument. They simply closed the door.
Do not mistake this for a technicality. It is the entire deposit question, and the numbers are not small. Payment stablecoins run around $250 billion today; industry projections put them at $1 to $2 trillion within a decade — 5 to 10 percent of all U.S. deposits — and the analysis the trade groups cite warns that deposit flight on that scale could cut consumer, small-business, and agricultural lending by a fifth or more. A stablecoin that pays nothing competes with the cash in your wallet. A stablecoin that effectively pays 4 percent competes with your money-market account and your deposit base — precisely the disintermediation fight I flagged when the CLARITY Act was moving. The U.K. wrote its rules so a stablecoin can never quietly become a savings substitute. The U.S. banned the substitute on paper and left a side door open. Whether Congress closes that door in the coming weeks is the most consequential unsettled question in American stablecoin policy.
Three reasons stand out, none of which require your institution to issue a token. First, dominance. Most stablecoin value is already dollar-denominated, and the GENIUS Act's more permissive, more profitable structure reinforces that lead. Dollar coins can scale because they can be built profitably; a sterling coin forced to hold zero-yield deposits at the Bank of England may struggle to make economic sense. Washington is extending the dollar across a faster rail, while London is intentionally slowing that rail in the name of stability.
Second, deposits. The U.K. capped stablecoin growth to protect bank lending. The U.S. did not. Instead, it is testing whether full backing and an imperfect yield ban are enough to keep deposits in the banking system. If your balance sheet depends on rate-sensitive deposits, you are part of that test, even if you never issue a coin.
Third, cross-border exposure. A dollar coin used at scale in Britain can fall under the U.K.'s systemic regime, bringing U.K.-held reserves, a U.K. entity, and 24-hour redemption requirements. Any institution building cross-border stablecoin flows must now satisfy two rulebooks, and the friction between them becomes a cost someone must absorb.
For a community bank, the exposure is almost entirely on the liability side. You will not issue a coin, but you fund yourself with precisely the rate-sensitive core deposits a 4-percent "rewards" dollar coin is engineered to attract. The yield loophole is a direct line to your least-sticky balances, which makes the open U.S. side door a community-bank funding question before it is anything else. The offsetting opportunity is narrower but real: reserve custody, a sponsor-bank or banking-as-a-service arrangement, and tokenized-deposit pilots let you stand on the rail rather than only bleed to it — provided the economics and the compliance are sized honestly rather than chased.
For a regional bank, this is where the decision actually gets made. You are large enough to issue, to partner, or to launch a tokenized deposit of your own; large enough that deposit flight moves the funding plan. The question is strategic and unavoidable — build the capability, rent it through a partner, or defend the deposit franchise by matching the value. In a permissive U.S. regime, standing still is itself a choice, and usually the riskiest one.
For a global or money-center bank, the cross-border, two-rulebook problem is the whole game. You are the institution that will run dollar coins at a scale that trips the U.K.'s "systemic" trigger — U.K.-held reserves, a British subsidiary, 24-hour redemption — while satisfying the GENIUS Act, the U.K. regime, and Europe's MiCA at once. Your risk is not deposit flight; it is operating one product under three regulators who do not agree, even as you become the main channel exporting the dollar on the permissive American rail.
Washington chose growth and is betting it can close the yield loophole before the deposit flight starts. London chose safety and is betting a coin built under its rules is still worth building. Both bets are unresolved — the U.K. regime does not go live until October 2027, and the OCC's yield rule is still being contested.
For any institution that lives on deposit funding, the move is not to pick a side but to know which trade-off lands on your balance sheet; for a fintech weighing issuance, it is to know which regime you can actually build under. Watch the OCC rulemaking above all else, because it decides whether dollar stablecoins end up as a payments rail or a deposit competitor — and price that reality into your funding plan before the market prices it for you.
And if you would rather close the loophole than sit on the sidelines, the industry has made it a single click. The campaign to urge the Senate to close the stablecoin yield loophole is live while the whip count runs, and with a floor vote only weeks away, this is the narrow window in which a note to your senators can still move the text.
CCG Catalyst advises community and regional banks, credit unions, and fintech companies on deposit strategy, payments modernization, and regulatory engagement. If your institution is weighing what stablecoin regulation — at home or abroad — means for its funding base and its payments roadmap, reach out to our team at www.ccgcatalyst.com, or see the full library at CCG Insights.
See our latest announcement: CCG Catalyst's Paul Schaus Named a 2026 Top Consultant by Consulting Magazine
By: Paul Schaus | Founder & Managing Partner, CCG Catalyst Consulting
Disclaimer: The views expressed in this article represent the perspective of CCG Catalyst Consulting based on our direct experience advising financial institutions. This commentary is intended to stimulate industry discussion and does not constitute legal, accounting, or regulatory advice.
