UK lawmakers cast doubt on stablecoins as money

The Financial Services Regulation Committee (FSRC) on Wednesday held a public session and questioned witnesses about stablecoins being the future of money. The witnesses claimed that the digital assets are mainly on- and off-ramps into crypto, rather than the future of money.

The House of Lords’ initiative is part of its new inquiry into how the tokens should be regulated in the United Kingdom. The Lords also sought to gather evidence on the role of stablecoins in payments, banking, and financial stability.

UK Lords question witnesses about stablecoins’ competition with banks

Critics didn't mince words today in the House of Lords.

Financial Times commentator Chris Giles testified that stablecoins are "not massively interesting" as a domestic currency, arguing they primarily serve as a bridge to volatile crypto markets rather than a "future of money"… pic.twitter.com/Kcs7f6XZVY

— Conor Kenny (@conorfkenny) February 4, 2026

The FSRC questioned Financial Times Economics Commentator Chris Giles and U.S. law professor Arthur E. Wilmarth Jr. on cross-border use of fiat-backed tokens and their competition with banks. The committee questioned the illegal financial risks posed by stablecoins and their treatment under the Guiding and Establishing National Innovation of U.S. Stablecoins (GENIUS). Giles argued that Britain has not yet widely adopted stablecoins because the country lacks a clear legal regulation for the assets. 

He believes that the lack of clear regulation makes it risky for households to hold stablecoins as money. The economics commentator added that a robust regime in the UK would ensure that the main opportunities for stablecoins would be for making transactions and payments more efficiently and cheaply. He believes the initiative would mainly work in cross-border and large corporate transfers.

Giles also told the FSRC that the instant, low-cost, and sterling-linked digital assets could disintermediate banks. He argued that sterling-backed digital assets’ current use was mostly on- and off-ramps to crypto for an intrinsically worthless asset. He stated that sterling-backed tokens are not massively interesting and will not take over the world financial system.

Giles revealed that he supports the Bank of England’s shift toward adding regulations on stablecoins. He noted that the UK’s central bank had set up strict banking rules, resolution plans, and a final liquidity backstop in the case of a rapid run on the bank.

Giles warned that the tokens are prone to illegal use, arguing that the assets had been labelled as people’s new suitcases of cash. He also stated that international oversight of exchanges and stronger Know Your Customer (KYC) and Anti Money Laundering (AML) checks are necessary if such tokens move beyond their current niche.

UK’s central bank shifts towards regulating stablecoins

Law professor Arthur E. Wilmarth told the FSRC that he did not view stablecoins as natural components of the financial system. He argued that tokenized deposits could do a better job than fiat-backed virtual assets.

Wilmarth also called the GENIUS Act a terrible and disastrous mistake for the financial industry. He pointed to the legislation’s rules that allow non-banks to issue dollar-denominated tokens.

The law professor referred to stablecoins as a form of regulatory arbitrage that enables lightly regulated firms to enter the money business. He believes the system undermines a century-old prudential framework within the banking system. 

Wilmarth also revealed that he has had a hard time agreeing with anything in the GENIUS Act. He believes the U.S. made many unfortunate choices, but stated that the UK’s central bank was proposing a more robust regime.

The FSRC’s probe into sterling-denominated tokens comes as lawmakers seek to understand how the market has changed since the first stablecoins were introduced over a decade ago. The lawmakers were also interested in knowing how the UK would compare to the U.S. and the European Union.

The Bank of England’s Executive Director for Financial Market Infrastructure, Sasha Mills, revealed that the bank partnered with the Financial Conduct Authority (FCA) to establish a framework for systemic stablecoins by the end of 2026. The Bank Policy Institute also stated in November that integrating fiat-backed tokens into the traditional financial system without regulations could lead to crypto shocks that would infect the broader economy.

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