The UK House of Lords Financial Services Regulation Committee has launched a formal inquiry into proposed stablecoin regulations, as the Bank of England (BoE) and the Financial Conduct Authority (FCA) move closer to finalizing rules for the sector. The inquiry seeks evidence from industry participants, experts, and the public on how stablecoins could reshape the UK’s financial system.
Lawmakers will examine the potential effects of fiat-backed stablecoins on banking, payments, and financial stability, alongside opportunities created by their growing adoption. The committee aims to assess whether the regulatory approach outlined by the BoE and FCA is measured, proportionate, and fit for purpose in a rapidly evolving market. Written submissions are open until March 11, with public hearings scheduled to follow.
Bank of England Targets Systemic Stablecoin Rules by End of 2026
The inquiry comes as the BoE works to finalize a framework for systemic stablecoins, defined as fiat-linked tokens widely used for payments in the UK. These instruments could pose risks to financial stability if not properly regulated.
Under current proposals, systemic stablecoin issuers would be required to be fully backed by high-quality reserves, with at least 40% held as deposits at the Bank of England. Authorities are also considering access to a central bank deposit account and a liquidity backstop facility.
Sasha Mills, executive director of financial market infrastructure at the BoE, said ;
The BoE has warned that increased stablecoin adoption could drain bank deposits and reduce credit availability to the real economy, making regulatory clarity a priority as the UK positions itself as a global hub for regulated digital finance.
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