The UK might still win the digital asset race

London’s fintech revolution transformed its financial landscape. Yet despite success stories like Monzo, which have scaled to over 13 million customers and over $1 billion in annual revenue since forming in 2017, broader indicators reveal a concerning trajectory. UK tech funding dropped 35% to £16.2 billion in 2024, London Stock Exchange delistings reached 88 last year, compared to just 18 new listings, and perhaps most troublingly, Revolut, one of London’s crown jewels, has announced its intentions to relocate key operations to Paris.

These figures underscore an uncomfortable reality: London risks losing its position as Europe’s premier financial innovation hub. The narrative that the UK lags behind in digital asset adoption and innovation has taken hold, with the US, APAC, and even the EU racing ahead with comprehensive digital asset frameworks. However, whilst this narrative is rooted in legitimate concerns, it does have potential oversights. First-mover advantage is a well-documented fallacy, and there remains time for London to reclaim leadership in the digital asset economy.

The cost of hesitation

The digital asset industry represents more than speculative trading and volatile tokens. Crypto’s global market cap crossed $4 trillion in September 2025, with some projections expecting it to reach over $20 trillion by 2030. These figures are supported by growing institutional interest from global leaders like BlackRock and JP Morgan, who increasingly view digital assets as an emerging asset class with transformative potential.

The recent stablecoin boom exemplifies this potential: with a global market cap over $300 billion and the likes of Citigroup forecasting their growth to $4 trillion by 2030, it seems that these digital assets are poised to reshape the digital economy and open new routes for cross-border capital flows. Crucially, stablecoin issuers generate substantial demand for government bonds and treasuries, currently holding large amounts of US government debt.

Whilst crypto has long evangelized its value to consumers, institutions are starting to recognize it, not just as a lucrative investment opportunity but as the next generation of financial infrastructure, capable of reducing transaction costs, accelerating settlement times, and improving margins across the board. Just as fintech delivered substantial economic benefits to the UK by creating thousands of jobs, attracting billions in investment, and reaffirming London’s financial credentials, a new generation of digital asset startups backed by institutional funding could deliver similar returns.

The UK, however, appears either threatened by this disruption or unable to take its transformative potential seriously. The only major political party that has articulated clear digital asset policy positions is the “upstart” party, Reform UK, whilst the incumbent government currently lacks a comprehensive or consistent stance, targeting full framework delivery by Q1 2026, and is unable to work in step with its central bank. This delay carries tangible consequences.

Regulatory paralysis and its consequences

According to 2025 surveys, 50% of UK crypto and fintech firms were denied bank accounts or had them closed, a stark contrast to the neobank-friendly policies that enabled Monzo and Revolut’s meteoric rise. Even more alarmingly, in 2024,  98% of crypto hedge funds faced unexplained banking denials. This systematic “debanking” of digital asset businesses stands in sharp relief against London’s earlier embrace of financial innovation.

In contrast to this, the US’s GENIUS Act established federal frameworks for stablecoin issuance earlier this year, and its proposed CLARITY Act will define market structure and regulatory authority going forward. The EU’s Markets in Crypto-Assets Regulation framework, despite implementation challenges, has been estimated to bring €1.8 trillion to European markets potentially, and APAC initiatives like Hong Kong’s August 2025 licensing regime have driven 85% market growth in the region.

However, this hesitance is slowly giving way to more decisive action: the recently announced UK-US Transatlantic Taskforce for Markets of the Future aims to deliver recommendations on digital asset regulatory cooperation by March ‘26. This represents a genuine opportunity for the UK to align with US frameworks on stablecoin standards, custody requirements, and cross-border compliance, potentially creating a competitive advantage over the EU’s fragmented approach.

Yet this initiative also highlights how far the UK has fallen behind. Whilst this taskforce could reduce regulatory friction for firms operating across both markets, it positions the UK as a follower rather than a leader, seeking alignment with US standards rather than setting the pace itself.

The Bank of England’s mixed signals

Recent developments from the Bank of England further illustrate the UK’s regulatory confusion. In July 2025, Governor Andrew Bailey warned that stablecoins could reduce traditional banks’ reliance on deposit-based lending, framing this as a threat to the banking system. This position reflected long-standing central bank conservatism toward digital assets, even bizarrely threatening to impose caps on the amount of stablecoins investors and businesses could hold.

However, in a remarkable about-face this week, Bailey softened his stance considerably. He acknowledged that it would be “wrong to be against stablecoins as a matter of principle,” noting they could drive innovation in payments both domestically and internationally. Bailey even suggested the financial system “does not have to be organized” around the current heavy reliance on commercial bank lending, proposing that “banks and stablecoins could coexist with non-banks carrying out more of the credit provision role.”

This evolution in thinking should be welcomed. Recent research suggests that reduced reliance on bank lending actually correlates with increased tech development in European economies, and Bailey’s change of heart might reflect a shift towards a more innovative approach. However, this reversal does not come with any actual policy decisions and comes years after the US and APAC already embraced similar frameworks, during which time the UK lost momentum and market share.

Why the UK can still lead on crypto assets

However, the fallacy of first-mover advantage offers genuine hope. Being first to market provides no guarantees; what matters isn’t who moves first, but who executes best. Several factors position the UK for a comeback.

Gemini’s 2025 report highlights that UK crypto ownership surged to 24%, growing faster than even the US. This grassroots adoption creates organic demand for better regulatory frameworks and suggests significant latent potential waiting to be unlocked. Regulatory leadership could amplify this trend, as clarity and favorable policies attract institutional investment to fuel expansion.

Furthermore, post-Brexit Britain has the flexibility to capitalize on its independence from EU markets whilst maintaining geographic proximity. MiCA implementation has been challenging, with predictions of 75% drops in licensed firms due to compliance hurdles and varying national deadlines. In such a scenario, the UK could offer a streamlined, principles-based alternative that learns from EU mistakes whilst preserving market access.

Similarly, the GENIUS Act’s specific federal structure and restrictions on yield-bearing stablecoins leave room for UK improvements. A framework covering broader asset classes and providing more flexibility for tokenized securities could position London as the bridge between traditional finance and digital innovation, and offer opportunities for regulatory arbitrage on other frameworks’ oversights.

The UK’s regulatory heritage supports this approach. Rather than creating entirely new frameworks, the UK can adapt existing financial services regulations to encompass digital assets, precisely the approach outlined in near-final draft legislation expected by year-end. This principles-based adaptation, rather than prescriptive rule-making, better accommodates rapid technological evolution.

The window is closing

Whilst the UK delays until 2026, competitors capture institutional investment, attract top talent, and build infrastructure for tomorrow’s financial system. Every month of hesitation compounds the opportunity cost. Revolut’s move to Paris isn’t an isolated incident; it signals a broader exodus that will accelerate unless policy changes. The UK can continue the path of regulatory caution, watching from the sidelines as the digital asset revolution unfolds elsewhere, or it can reclaim its position as a global financial innovation leader through decisive action.

Britain built its financial reputation on bold innovation, from the world’s first ATM to pioneering fintech regulation. That tradition of leadership need not end with the analog economy. Digital assets represent the next wave of financial innovation, and the economic returns — jobs, investment, tax revenue, and global influence — justify the regulatory risk. With a comprehensive crypto policy, the UK can restore London’s pull for global capital and position itself as the bridge between traditional finance and the digital future.