The US and UK are redrawing the digital dollar (and pound) borders

As we move through the final days of 2025, the “wild west” of the digital asset era hasn’t just been tamed it’s been urbanized. For the fintech communities in London, New York, and Silicon Valley, the fog of regulatory uncertainty that defined the early 2020s has finally lifted, revealing two distinct, high-tech financial fortresses.

The enactment of the GENIUS Act in the United States and the Bank of England’s (BoE) finalized regime for systemic stablecoins represent more than just “new rules.” They are a fundamental redrawing of the borders of the digital dollar and the digital pound.

The American Frontier: Federal Recognition via the GENIUS Act

In a landmark move this July, the US passed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. For years, the industry operated under “regulation by enforcement.” Today, it has a federal playbook that has fundamentally changed the game:

• Exit the SEC/CFTC Crosshairs: The Act explicitly states that “payment stablecoins” are neither securities nor commodities. This removes them from the jurisdiction of the SEC and CFTC, placing them firmly under the oversight of banking regulators like the OCC.

• The 1:1 Iron Rule: Issuers must back their tokens 1:1 with high-quality liquid assets (HQLA), specifically US dollars and short-term Treasuries.

• Banks Join the Fray: The FDIC has already begun implementing rules (12 CFR Part 303) that allow traditional banks to issue stablecoins through subsidiaries, effectively moving the US financial markets “on-chain” with federal blessing.

The British Bastion: The 40:60 Systemic Split

Across the pond, the UK has taken a more granular, stability-focused approach. The Bank of England’s new regime distinguishes between “systemic” assets (those that could break the economy if they fail) and “non-systemic” ones.

• The Reserve Formula: For systemic sterling stablecoins, the BoE is remarkably specific. Issuers must hold at least 40% of backing assets as unremunerated deposits at the Bank of England.

• The Yield Gap: The remaining 60% can be held in short-term sterling-denominated UK government debt.

• Holding Limits: To prevent a “bank run” from traditional accounts into digital ones, the BoE has proposed temporary holding limits of £20,000 for individuals and £10 million for businesses.

The Security Angle: Defending the New Perimeter

While the regulators have built the legal walls, the “threat landscape” remains the greatest hurdle to mainstream adoption. In 2025 alone, crypto-related thefts resulted in $3.4 billion in losses, with a significant portion driven by state-sponsored actors and AI-powered scams.

1. AI-Powered Fraud: We have seen a surge in “deepfake” social engineering. Hackers are now using AI to mimic C-suite executives to authorize fraudulent stablecoin transfers, bypass KYC protocols, and infiltrate fintech providers.

2. Smart Contract Vulnerabilities: Even “regulated” assets are only as secure as their code. Exploits in poorly audited contracts remain a primary concern, with the FCA now requiring firms to conduct rigorous risk assessments under the new COREPRU and CRYPTOPRU rulebooks.

3. The “Laundering Race”: In 2025, funds from 23% of hacks were fully laundered before they were even publicly disclosed. This has forced fintechs to shift from “reactive” security to real-time, automated compliance monitoring.

Insight for Fintech Leaders: The “Local Subsidiary” Mandate

One of the most critical “border” developments of late 2025 is the Bank of England’s insistence on subsidiary models. For a US-based, sterling-denominated issuer to operate in the UK, the BoE now proposes that they must establish a UK subsidiary, with reserve assets held locally on statutory trust.

This creates a significant operational hurdle for global players. You can no longer just “drop” a dollar-backed token into the London market; you need a localized balance sheet and a UK-regulated custodian.

Actionable Takeaways

For firms operating in this new, dual-track environment:

• Prudential Preparedness: If you are a UK-based firm, ensure your data systems can handle the “K-Factor” calculations required by the FCA’s new rulebooks, which will require at least 9 months of historical data.

• Reserve Strategy: US issuers must prepare for strict federal audits of their HQLA, while UK issuers need to factor in the lack of interest (unremunerated status) on that 40% BoE deposit into their revenue models.

• Cyber Resilience: With 60% of IT experts identifying AI-enhanced malware as the top threat for the coming year, upgrading to “post-quantum” ready cryptography and AI-driven threat hunting isn’t optional it’s a survival requirement.

The Bottom Line

The “Stablecoin Settlement” of 2025 has provided the legal infrastructure needed for institutional adoption, but it has also ended the era of “borderless” digital assets. The winners in this new landscape won’t just be the most innovative; they will be the ones who can navigate the complex, high-security architecture of two of the world’s most powerful financial regulators.

The digital pound and the digital dollar are finally here. The only question is: is your treasury ready to cross the border?