UK House of Lords opens inquiry into proposed stablecoin regulations

The House of Lords Financial Services Regulation Committee has launched an inquiry into proposed stablecoin rules in the United Kingdom, seeking public input on the regulatory frameworks set by the Bank of England (BoE) and the Financial Conduct Authority (FCA).

According to Baroness Noakes, chair of the committee, the review will assess whether the regulatory frameworks proposed by the BoE and the FCA provide “measured and proportionate responses” to developments in the stablecoin market.

The inquiry will also examine how stablecoins could affect traditional financial services such as banking and payments. It will assess the opportunities and risks arising from their growing use in the UK.

Baroness Noakes stated, “We have launched this inquiry to assess the opportunities and risks that the growth of stablecoins may present for the UK financial services sector and the wider economy […] We welcome evidence and views from anyone with expertise or interest in this area.”

The House of Lords' Financial Services Committee is launching a stablecoin inquiry. pic.twitter.com/fvN1fAydEm

— The Peg (@cashequivalence) January 29, 2026

Written submissions from industry participants, experts, and members of the public are open until March 11. The committee is scheduled to take oral evidence at a public hearing on Wednesday.

The BOE prioritizes the development of a systemic stablecoin framework 

The inquiry comes as UK authorities continue to refine their approach to stablecoin oversight. The Bank of England stated that it is set to prioritize the development of a systemic stablecoin framework and tokenized collateral policies in 2026.

This move looks to clarify regulations under the UK’s EMIR framework and expand the digital securities sandbox. Sasha Mills, Executive Director for Financial Market Infrastructure, emphasized that these efforts will influence the future of digital finance in the UK. 

“Our regime proposes to provide systemic stablecoins with a deposit account at the Bank of England while also considering putting in place a liquidity facility to provide a backstop for stablecoin issuers,” she stated

The proposed stablecoin framework will allow systemic issuers access to Bank of England deposit accounts and potential liquidity support. The backing structure for these stablecoins will include 60% short-term UK government bonds and 40% Bank of England deposits. 

According to the BoE, “systemic stablecoins” are fiat-linked stablecoins widely used in UK payments, including pound sterling-denominated tokens used for retail or corporate payments. To that end, they could pose risks to financial stability.

Temporary holding limits are proposed at £20,000 for individuals and £10 million for businesses. The Bank plans to finalize the framework by year-end and extend the digital securities sandbox to test wholesale settlement for regulated stablecoins.

Currently, stablecoins used mainly for crypto trading and non-payment use cases, like USDC, USDT, are not treated as UK-regulated payment instruments yet. However,  this is expected to evolve with the new regime. Full implementation is targeted for October 2027.

The two biggest economies reaffirm their opposite stance on stablecoins

In the US, the GENIUS Act, a stablecoin regulation, was signed in 2025. Under the GENIUS Act, stablecoins must be backed one-for-one by US dollars or equivalent high-quality liquid assets, such as short-term US Treasury bills. 

Stablecoin issuers are subject to US banking and anti-money-laundering rules. Regulators are expected to issue detailed implementing rules by mid-2026 to define licensing and operational requirements under the CLARITY Act.

On the other hand, mainland China has maintained a strict prohibition on crypto activities, including stablecoins. As reported by Cryptopolitan, in December, Chinese authorities reaffirmed that all virtual currency-related business activities, including stablecoins, are illegal financial operations. 

According to them, they lack legal tender status and pose risks around money laundering and cross-border capital flows. That said, China has embraced its own central bank digital currency, the digital yuan or e-CNY. It focuses on financial innovation on that platform rather than on privately issued stablecoins.

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