06-05-2026 
|
Getting your Trinity Audio player ready...
|
The United Kingdom House of Lords Financial Services Regulation Committee has published its findings following the conclusion of a four-month inquiry into stablecoins, in which it urged the Bank of England (BoE) to back stablecoins and pursue a “less prescriptive” approach to regulation.
- U.K. Lords call for stablecoin backing
- Assessing the U.K.’s stablecoin growth
- Stablecoins spark warnings on financial risks
In a June 3 report, aptly titled “Stablecoins: waiting for regulation,” the Committee outlined its key conclusions and recommendations resulting from the inquiry, which began in January 2026 with a call for evidence.
The U.K.’s new digital asset regime is set to come into force on October 25, 2027, the date when the Financial Services and Markets Act 2000 (Cryptoassets) Regulations 2026 will officially bring new regulated activities for digital currencies under the jurisdiction of the Financial Conduct Authority (FCA) and “systemic” stablecoins under the purview of the BoE.
In the meantime, both regulators have continued to consult on their approaches, while the cross-party House of Lords Financial Services Regulation Committee—created in early 2024 following the passage of the Financial Services and Markets Act 2023—began its own inquiry into the booming global stablecoin space, which surged to a record $322 billion market value in May 2026.
Among the main takeaways from the inquiry was that the Committee said it supported much of the BoE and the FCA’s regulatory proposals for stablecoins—outlined in the FCA’s May 2025 consultation paper and the BoE’s November 2025 consultation paper—including the requirement for stablecoin issuers to back stablecoins 1:1, and a proposed backstop lending facility from the central bank.
However, it also warned that the U.K.’s proposed approach to so-called “systemic stablecoins”—those deemed large or significant enough to be a systemic risk to the broader economy—diverged from international equivalents, such as the European Union’s Markets in Crypto-Assets (MiCA) regime or the United States’ GENIUS Act, in its requirements for systemic issuers to hold at least 40% of their backing assets in unremunerated central bank deposits, and restrictions on commercial banks issuing stablecoins.
“The Bank should not pre-emptively impose holding limits, and should use them only if the financial stability risks warrant it, because they could unnecessarily inhibit the growth of GBP stablecoins and prove impractical to implement,” read the report.
The Committee had more to say on GBP- or Sterling-backed stablecoins, an area in which it argued the U.K. was lagging behind, in a market where 98% of stablecoins are U.S. dollar-denominated.
“The global stablecoin market is dominated by U.S. dollar stablecoins and evolved to serve cryptoasset trading,” said the Baroness Sheila Noakes DBE, Chairman of the House of Lords Financial Services Regulation Committee. “The UK is lagging behind compared with the U.S. and the EU but is now moving in the right direction.”
The Baroness went on to caution that “no-one knows whether or how a U.K.-based stablecoin market could develop,” and therefore regulation “needs to allow innovation while ensuring that risks are effectively mitigated.”
Beyond concerns about the specific rules and mandates of the proposed stablecoins framework, the Committee was keen to underscore the equally concerning impact further delay to the regime could have on the U.K. stablecoin market.
“We are also concerned that considerable uncertainty persists, which prevents issuers from being able to plan and so inhibits the growth of the market,” read the report. “There is a lack of clarity on how the transition from the FCA’s regime to dual regulation by both the Bank and the FCA for systemic stablecoins would work.”
To address this continuing uncertainty, the Committee said that: “The Government and regulators must adhere to the timelines they have set out, and should carefully consider our recommendations on how aspects of the proposed regulations might be adjusted to bring the certainty and confidence needed for the GBP stablecoin market to develop.”
This means stablecoin rules—as with those for the digital asset space more broadly—will be finalized by this summer and come into force by next October.
Stablecoin inquiry
At the end of January, the House of Lords Financial Services Regulation Committee, a Lords select committee appointed to consider financial services regulation, launched the inquiry into stablecoins in the U.K., calling for evidence on their growth and proposed regulation in the country.
Baroness Noakes described the Committee’s goal at the time as assessing “the opportunities and risks that the growth of stablecoins may present for the U.K. financial services sector and the wider economy and whether the Bank of England and FCA’s proposed regulatory frameworks provide measured and proportionate responses to these developments.”It held its first hearing on February 4, receiving evidence from two expert witnesses—Chris Giles, economics commentator at the Financial Times, and Professor Arthur Wilmarth, Jr., Professor Emeritus of Law at George Washington University Law School—who gave largely unfavorable feedback on topics such as safety, regulation, and whether stablecoins are the future of money.
This skeptical feedback was balanced out a week later when the second hearing’s witnesses painted a more positive picture of what stablecoins have to offer the economy and finance space. The two specialists—Simon Gleeson, law Professor at the University of Oxford and a leading expert in financial services and banking regulation, and Dr. Kern Alexander, Professor of International Banking and Financial Law at the University of Zurich—spoke broadly in favor of stablecoins as a useful asset class for settling cross-border payments and providing competition to the leading payment providers, Visa and MasterCard.
However, they also reserved some criticism for the U.K.’s proposed regulatory approach, including regarding intermediation and the central bank’s suggested holding limits.
Over the course of the next few months the inquiry heard from a diverse range of further witnesses, including Matthias Bauer-Langgartner, Head of Policy at blockchain analysis firm Chainalysis; Jesse McWaters, Executive Vice President & Head of Global Policy; Rory Tanner, Head of UK Government Affairs and Public Policy; Dante Disparte, Chief Strategy Officer and Head of Global Policy & International Operations; and various representatives from the BoE, FCA, and HM Treasury.
These discussions helped form the conclusions and recommendations that make up the Committee’s report, published on June 3.
Hope and caution over stablecoins and their regulation
In terms of overall impressions of stablecoins as an asset class, the inquiry concluded that the sector, particularly sterling-denominated tokens, could bring benefits such as fast and low-cost payment options, greater efficiency in settlement, and innovations such as programmable payments.
This, read the report, “could complement other forms of money and drive competition in the payments sector.”
However, with increased stablecoin use comes potential risks, and the Committee was also keen to highlight concerns about financial stability, the disintermediation of the traditional banking sector, consumer protection, and the use of stablecoins for illicit purposes.
On the U.K.’s impending regulatory frameworks, the Committee said there is “much that we support” in the proposed FCA and BoE approaches. However, the cross-party group had some recommendations for these authorities, as well as for government policymakers.
“Regulators should ensure that in regulating stablecoins, they are not inadvertently applying a more severe risk lens than they do for other forms of payment,” said the Committee. “The regulators should seek to encourage safe and responsible innovation in the UK stablecoin market and remain open to new technological developments.”
Beyond factors the Committee felt would hamper the growth of the stablecoin market, its other primary concern was ensuring the U.K. has appropriate safeguards against those who would abuse the stablecoin sector.
“HM Treasury should consider with the Bank of England and FCA whether the existing legal frameworks are sufficient to detect and deter illicit activity using private unhosted wallets, and be prepared to legislate to restrict their use if necessary,” read the report.
It will now be up to the FCA and BoE to take on board, or not, the Lords Committee’s recommendations. But given that both regulators were active participants in the inquiry, it’s likely they were also paying close attention to the findings.
Watch | MiCA and the future of stablecoins: What comes next for Tether?
Recommended for you
