By Janine Hirt

Copyright cityam

The UK is moving too slowly in emerging areas like stablecoins, purring London’s world-leading fintech sector at risk, says Janine Hirt

London has long been a global leader in fintech, a position built on a history of innovation and a welcoming environment for startups. This success was fuelled by a pro-growth approach to policy and regulation following the 2008 financial crisis, which encouraged competition and the use of technology to create a more democratic and inclusive financial sector.

For over a decade, founders from the UK and beyond have chosen to build their companies here, turning fintech into a powerful engine of economic growth for the entire country. In fact, fintechs are responsible for more than 60 per cent of all lending to small and medium-sized businesses and have produced some of the UK’s largest unicorns.

Despite this success, a recent Global Financial Centres Index showed a growing number of international financial professionals believe London’s fintech sector is losing ground to competitors like Hong Kong, Shenzhen, and Singapore.

The risk of other countries catching up has been a known issue, but it has been overshadowed by the years of massive investment into UK fintech. For a long time, the total amount of venture capital funding raised by UK fintechs was greater than the rest of Europe combined. However, recent analysis has shown that this advantage is shrinking.

To secure its leadership position, the UK must send a clear message that it is committed to being the best place to start and scale a fintech business. While the UK already has a stable business environment and a strong legal system, it needs to move faster on regulatory reform.

There is also a cultural component – we need to foster a culture that celebrates success, applauds ambition, champions drive and supports those founders who risk it all to make a positive impact and change the world. Importantly, it is indeed these entrepreneurs, founders and innovators that will drive the growth we all so desperately want and need.

Risk v reward

The key is to recapture the balance between risk and reward that initially made the UK a progressive fintech hub. Recent announcements like the Chancellor’s Leeds Reforms have been welcomed by the sector, providing a strong framework to build upon. Now we need to work together – government, industry and regulators – to ensure they are properly realised.

In addition, greater incentives for innovators are critical. Speak to any entrepreneur and they will tell you of the sacrifices made to get their venture off the ground. It’s in the face of these risks that they take the leap regardless, driven by a vision, but also with a belief that their years of hard work will eventually pay off at exit. At the moment, there’s work to be done to improve the competitiveness of our tax environment for founders (and highly skilled workers in general), acknowledging the risks they have taken and incentivizing more entrepreneurs to build the businesses of the future.

Clarity in regulation is crucial for any financial centre, but it’s especially vital for fintech, where firms rely on new technology and first-mover advantage is everything. Entrepreneurs need confidence that new legislation won’t disproportionately penalise them compared to international competitors.

The potential of stablecoins

The UK’s slow pace is particularly acute in the emerging areas like digital assets and stablecoins – digital currencies pegged to stable assets like the dollar. Stablecoins have the potential to revolutionise payments and market infrastructure, offering a cheaper, faster, and more efficient way to handle everything from international payments to everyday transactions.

The rest of the world is moving forward with stablecoins. Governments and fintechs in countries like China, the US, Hong Kong, Singapore and the EU are creating regulatory frameworks to support their development. Meanwhile, the UK is falling short. The Bank of England has been overly cautious, proposing limits on how many stablecoins an individual or business can hold – a move that is completely out of step with other major jurisdictions.

This approach treats stablecoins as a threat to be contained rather than a tool for innovation, which risks pushing businesses and talent to more welcoming regions. It could also lead to scenarios where UK firms are forced to rely on foreign-backed stablecoins.

The time has come for London and the wider UK to protect its place as a global leader in fintech by replacing caution with ambition, and hesitation with decisive action

This cautious approach is indicative of a broader regulatory problem that risks eroding confidence in UK fintech. While the window of opportunity is closing, it’s not too late to regain momentum. The UK can create a regulatory framework that is both robust and flexible. This would enable a GBP-backed stablecoin to become a global standard, solidifying the pound’s role in the digital economy.

There is a real risk that if the UK fails to act, it will lose its seat at the table as global financial infrastructure evolves. Yet at the same time, the opportunity to drive forward reform and change, and to attract entrepreneurs from around the world, has arguably never been greater. The time has come for London and the wider UK to protect its place as a global leader in fintech by replacing caution with ambition, and hesitation with decisive action.

Let’s ensure our legacy is one of forward-thinking leadership, not a missed opportunity.

Janine Hirt is the CEO of Innovate Finance