UK House of Lords Committee launches stablecoin inquiry

The United Kingdom House of Lords (HoL) Financial Services Regulation Committee, a Lords select committee appointed to consider financial services regulation, on Thursday invited submissions to its new inquiry on the growth and proposed regulation of stablecoins in the country.

In the light of a boom period for the global stablecoin market—inspired by the policies and declarations of United States President Donald Trump since his January 2025 inauguration—the U.K., not wanting to miss the boat, has been increasingly exploring support for sterling-denominated stablecoins.

This mission was given renewed momentum last December when the U.K.’s top finance sector regulator, the Financial Conduct Authority (FCA), officially made stablecoin payments a priority for 2026.

With this context in mind, the HoL Financial Services Regulation Committee—established early 2024 to scrutinize financial service rules and the impact of regulation on financial stability, consumers, and competitiveness—is seeking evidence on a number of key questions.

Firstly, the Committee wants to explore how the global market and issuance of stablecoins have developed since 2014, and how the U.K. market compares with those of the U.S. and the European Union.

Another major question was how the sterling-denominated stablecoin market is expected to develop in the coming years, including who uses stablecoins and for what purposes, and whether there are any existing regulatory rules impacting the growth of stablecoins in the U.K.

In terms of the broader implications of the U.K. throwing its weight behind stablecoins, the Committee also wants to know what “opportunities and risks” the growth of stablecoins (both sterling- and USD-denominated) poses for the U.K.’s economy, and whether this growth could disrupt current mone

Other points of inquiry included how the growth of stablecoins will impact the Bank of England (BoE), Prudential Regulation Authority and FCA’s statutory objectives; what implications the BoE and the FCA’s proposed regulatory regimes pose for the adoption and growth of stablecoins; and what the U.K. can learn from the way other jurisdictions have approached the regulation of stablecoins, particularly the U.S. and the EU.

“We have launched this inquiry to assess 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,” said Baroness Sheila Noakes DBE, Chair of the Financial Services Regulation Committee.

Stablecoin a priority

In December 2025, the FCA set ambitious new growth targets for 2026, including support for locally issued stablecoins, artificial intelligence (AI) digitization, and tokenization.

In a letter to the Prime Minister, the regulator outlined its goals for 2026, stating that it aims to deliver a new wave of growth initiatives focusing on “more efficient supervision, the digitalization of financial services, increasing SME lending, and boosting trade and international competitiveness.”

Key plans for 2026 included finalizing digital assets rules and progressing U.K.-issued sterling stablecoins in order to provide “faster and more convenient” payments, as well as deepening U.K. market integration with the U.S. through the Transatlantic Taskforce for Markets of the Future.

According to an FCA press release at the time, the regulator said it would open up its regulatory sandbox, a scheme for the safe testing of products and the support of innovative policy development, to firms wanting to experiment with the issuance of stablecoins.

However, the U.K.’s ambitious goals for stablecoin growth come amid regulatory uncertainty, as the sector remains largely unregulated and the FCA has yet to announce the results of its consultations on stablecoins, which ended July 31, 2025.

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Regulatory proposals

On May 28, 2025, the FCA published two consultation papers, one on “stablecoin issuance and cryptoasset custody,” and the other on “a prudential regime for cryptoasset firms.”

In its consultation paper on stablecoin issuance and cryptoasset custody, the regulator laid out its plans to ensure regulated stablecoins maintain their value and that customers are provided with clear information on how the backing assets are managed, as well as to bring issuers and custodians into the U.K.’s financial services authorization regime.

Proposals included that stablecoin issuers appoint independent third-party custodians to hold reserve assets; a minimum on-demand deposit requirement of 5%; a ban on issuers paying holders interest; requiring issuers to keep assets segregated in a statutory trust; a mandate that any stablecoin holder can request direct redemption of any amount, to be actioned by the end of the following working day; and a permanent minimum capital requirement for issuers of qualifying stablecoins, to be set at £350,000 (around $471,500).

The FCA is currently considering feedback on the consultation and said it aims to publish the final rules sometime this year.

However, given that one of the questions the Lords Committee is seeking feedback on concerns how stablecoins should be regulated, it is quite possible these “final rules” may be subject to further change, depending on the outcome of the Committee’s inquest.

The FCA is also still awaiting legislation that would officially grant it rulemaking authority over the digital asset sector, which could prove a further source of delay to stablecoin regulation. The legislation is expected to pass this year, but as things stand, it is still in draft form and without any clear indication of when it will be enacted into law.

All of which means that, despite apparent enthusiasm from finance regulators and lawmakers alike, the future of stablecoins in the U.K. remains unclear.

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