Coinbase CEO Brian Armstrong is challenging proposed restrictions on stablecoins in the United Kingdom, warning that the measures could undercut the country’s ambitions to be a leader in digital finance just as token-based revenues are becoming a major profit engine for exchanges.
According to Armstrong, draft rules being finalized by the Bank of England and other UK regulators would cap how much stablecoin individuals and institutions can hold and sharply limit yields and rewards that platforms can offer on those tokens. He argues that, instead of making the UK safer and more competitive, such a framework would freeze innovation and push capital to more accommodating jurisdictions.
Armstrong stressed that stablecoins have moved far beyond a niche use case and are now at the heart of the emerging tokenized financial system. For exchanges like Coinbase, they are no longer just a convenient on‑ramp into crypto markets: they are a primary source of fee income, interest spreads, and settlement flows. Putting strict limits on balances and returns, he warned, would be “out of step” with the way the global market is evolving.
He also emphasized the competitiveness angle. The UK has spent years branding itself as a forward‑looking, innovation‑friendly financial center. At the same time, regions like the European Union, the United Arab Emirates, Singapore, and parts of North America are building detailed, permissive but controlled regimes for stablecoins and tokenization. If the UK ends up with one of the more restrictive rulebooks, Armstrong believes it will deter issuers, trading venues, and fintech startups from basing their operations in London.
The Bank of England’s draft approach reportedly includes caps on how much regulated firms can facilitate in stablecoin holdings per customer and tight constraints on yield‑bearing products linked to those assets. The rationale from supervisors is clear: they worry that high‑yield stablecoin programs can resemble unregulated bank deposits or shadow money‑market funds, potentially exposing consumers to losses if a token de‑pegs or an issuer fails. They also fear rapid, technology‑driven “runs” if confidence in a major stablecoin suddenly evaporates.
Armstrong does not dispute the need for guardrails but argues that an “over‑corrective” stance will backfire. In his view, the better path is to fully integrate stablecoin activity into the supervised financial system: require high‑quality reserves, daily transparency, robust redemption rights, and clear capital and risk‑management standards-while still allowing the instruments to be used at scale and to offer competitive returns. Prohibiting yields outright or setting very low caps on balances, he suggests, would simply push users toward less regulated offshore platforms or instruments that UK authorities do not control.
His public comments are part of a broader push to influence how the UK designs its digital asset regime. Armstrong has framed stablecoins and tokenization as core pillars of the “digital economy,” not peripheral speculation. He argues that a modern financial center must accommodate on‑chain settlement, tokenized cash, and programmable money if it wants to remain relevant in global capital markets over the next decade.
The stakes are not merely philosophical for Coinbase. In recent years, as spot trading fees have compressed under competitive pressure, the company has increasingly leaned on stablecoin‑related income. This includes interest earned on fiat reserves backing certain tokens, revenue from partnerships with issuers, and fees generated by payment, custody, and settlement services built on top of stablecoin rails. As total circulating supply and on‑chain activity in major stablecoins have grown, so too has this revenue stream.
At the same time, new tokenized asset products and “on‑chain treasuries” are emerging as high‑margin lines of business. Companies and institutions are starting to move cash management, settlement, and even bond‑like instruments onto blockchains, often using stablecoins as a base layer. Coinbase and similar firms see this as a key frontier for growth. Rules that limit how much of these tokens can sit on balance sheets or how they can be remunerated would directly constrain that opportunity.
Critics of the UK’s current direction say there is a risk of repeating past mistakes in financial regulation: waiting until an industry has already taken shape elsewhere before attempting to catch up with rushed, reactive reforms. If the UK’s regime proves too restrictive, stablecoin issuers may prioritize licenses and regulatory relationships in other countries, then offer products globally from those hubs. In that scenario, the UK could end up with less oversight and fewer domestic jobs, while its residents still access stablecoins through foreign providers.
Supporters of stricter caps counter that the events of the last few years-the collapse of algorithmic stablecoins, multiple high‑profile exchange failures, and episodes of extreme market stress-justify a conservative stance. They contend that stablecoins that function as de facto bank deposits should face very similar prudential constraints to banks, including limitations that reduce the risk of rapid runs or unsustainable yield promises. From this perspective, short‑term loss of market share is acceptable if it reduces systemic risk.
Beneath the policy debate lies a more fundamental question: what role should stablecoins play in national financial systems? One vision, closer to Armstrong’s, sees them as a backbone for instant, low‑cost global payments, digital commerce, and tokenized capital markets. Regulators in that scenario would focus on enforcing transparency, solvency, and sound risk practices, while allowing large‑scale use and competitive financial products. The alternative vision treats them as narrow instruments, primarily for limited use within tightly controlled environments, with strict constraints on size and functionality to prevent them from competing with traditional deposits and payment rails.
For the UK, the timing is especially sensitive. The government has repeatedly signaled that it wants to attract crypto and fintech businesses and position itself at the forefront of tokenization and digital securities. Large banks are experimenting with on‑chain settlement, asset managers are piloting tokenized funds, and payment firms are testing stablecoin‑based remittance routes. A heavy‑handed approach to caps and yields could slow or redirect many of these pilot programs just as they are reaching commercial scale.
There is also the question of consumer choice. Many retail users appreciate stablecoins not only for trading but as a simple, borderless dollar or pound proxy that can be sent and received at any time of day, often with lower fees than traditional bank transfers or card networks. Interest‑bearing products, when structured transparently and with fully backed reserves, are viewed by some as a more accessible alternative to money‑market funds. Strict caps might limit how much value ordinary users are allowed to keep in these instruments, even if they understand the risks and prefer them to legacy offerings.
From a market‑structure perspective, liquidity concentration is another concern. If UK‑authorized entities face stringent caps, larger pools of liquidity may consolidate in other regions. That in turn can affect spreads, execution quality, and the depth of pairs involving major stablecoins on UK platforms. Over time, traders and professional market‑makers may migrate activity to jurisdictions with higher limits, reducing the role of UK venues in price discovery and global order flow.
For Coinbase, the regulatory battle in London mirrors ongoing tensions in Washington. In the United States, the company has clashed with securities and banking regulators over how various token products should be classified and supervised. Stablecoins sit at the heart of that fight as well: depending on how they are defined-payments instruments, securities, deposits, or something else-the business models built around them can either flourish or be significantly curtailed. Armstrong’s intervention in the UK debate shows how coordinated and global the company’s regulatory strategy has become.
Looking ahead, several compromise paths are possible. UK policymakers could maintain high prudential standards but relax or remove hard numerical caps, instead relying on stress tests, liquidity requirements, and dynamic oversight that scales with the size and risk profile of each stablecoin. They might differentiate more clearly between fully backed fiat stablecoins, riskier algorithmic designs, and tokenized money‑market instruments, tailoring rules to actual risk rather than applying blanket limits.
They could also encourage closer collaboration between traditional banks and stablecoin issuers, allowing banks to issue tokenized deposits under existing frameworks. This hybrid approach would merge the stability and regulatory familiarity of bank money with the programmability and efficiency of on‑chain settlement. In that world, caps might become less necessary, because the instruments would sit squarely within the regulated perimeter.
For now, Armstrong’s message is blunt: if the UK wants to lead in the digital economy, it cannot afford to treat stablecoins purely as a threat. In his view, they are an inevitable part of the next phase of financial infrastructure, and countries that harness them thoughtfully-balancing robust consumer protection with room for growth-will attract the capital, talent, and technology that define the coming decade of finance. Whether UK authorities adjust their stance or double down on strict caps will signal how seriously they take that competition.