UK Considers Expanding Treasury Bills After FCA Admits ‘Major Firm’ Into Stablecoin Sandbox

Key Takeaways

• The U.K. government will consult on changes expanding the market for Treasury bills.

• Compared to its peers, the U.K. government debt has much longer average maturities.

• A “major firm” will test a GBP stablecoin in the FCA’s regulatory sandbox.

In the United States, stablecoins have already driven a noticeable increase in demand for Treasury bills.

Now, as regulators in the U.K. anticipate a wave of GBP-denominated stablecoins, the government is considering expanding its own T-bill market.

Stablecoins and Government Debt

To ensure they remain liquid enough to fund redemptions, stablecoin issuers fill their reserves with short-dated Treasury securities—mostly T-bills with less than three months to maturity and overnight repurchase agreements.

Speaking on Nov. 12, U.S. Treasury Secretary Scott Bessent said the stablecoin market could “grow tenfold” by the end of the decade. As it does, “so too will the demand for Treasury bills.”

He acknowledged that evolving demand would require adjusting what kinds of debt the Treasury issues, implying a shift toward more bills versus notes and bonds.

U.K. Government Explores Debt Adjustment

Compared to the U.S. and other comparable economies, the U.K.’s government debt is skewed toward long-dated gilts.

As noted in the U.K.’s Autumn Budget, published on Wednesday, the country has the longest average debt maturity among the G7—approximately seven years.

However, with demand for 30–50-year gilts already waning due to structural changes in pensions and banking, the government acknowledged that annual tweaks to its issuance schedule may no longer be sufficient.

To address this, it will launch a consultation on “expanding and deepening the Treasury bill market” in January.

‘Major Firm’ Admitted Into FCA Sandbox

The government’s proposal to adjust debt issuance is framed as a resilience measure, with the Treasury committed to maintaining “as diversified an investor base as possible.”

Currently, there are only a handful of unregulated GBP stablecoins with a combined market capitalization of a few million.

However, regulators are preparing for a wave of adoption that could see stablecoin issuers emerge as top buyers of government debt.

With the Bank of England expected to finalize its stablecoin regime in 2026, the Financial Conduct Authority (FCA) will run a dedicated stablecoin cohort in its regulatory sandbox.

Announcing the news on Wednesday, David Geale, executive director for digital finance at the Payment Systems Regulator, said a “major firm” had already been accepted into the sandbox to test a GBP stablecoin.

The British situation is starkly different from the U.S., where USD-pegged coins had already grown large enough to influence the Treasury market by the time Congress passed the Genius Act.

Yet, the country also requires more drastic changes to the mix of debt if it is to modernize a market that is currently ill-suited for digital-asset liquidity.

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