The UK parliament has launched an inquiry into stablecoins to assess the sector and the effectiveness of the proposed regulation.
In a statement On 29 January, the House of Lords Financial Services Regulatory Committee (FSRC) requested evidence on the sector’s growth and adoption projections.
The scope of the investigation covers the opportunities and risks of the sector’s growth. This will include the impact on monetary control and the UK economy as a whole.
Additionally, the survey will examine the competitiveness of sterling-backed stablecoins globally.
Sheila Valerie Noakes, Baroness Noakes DBE and chair of the FSRC, added that the investigation:
“Assess whether the regulatory frameworks proposed by the Bank of England and the FCA provide measured and proportionate responses to these developments.”
UK stablecoin regulations proposed
Presentations of evidence and experts covering the central questions of the inquiry will run until March 11, 2026. This fits perfectly with the UK’s drive to finalize rules for the sector by the end of this year.
Source: Bank of England
At the end of 2025, the Bank of England (BoE) published propose regulations for sterling-backed stablecoins, emphasizing that issuers’ reserve assets will be backed by a 60/40 formula. This means that 60% of reserve assets will be able to be exposed to short-term UK government bonds to earn interest.
The remaining 40% of reserves will be deposited with the BoE and will not earn interest. Additionally, regulators have proposed a cap of £20,000 per person and £10 million per company to mitigate financial stability risks.
It is worth pointing out that the caps appear to be a measured response to address concerns among traditional US banks that the flight of deposits to stablecoins could derail the availability of credit.
Criticisms of the proposed rules
However, crypto supporters such as Stani Kulechov, the founder of DeFi platform Aave, have criticized the proposals. He argued that capping interest earning potential and holdings would make stablecoins based on the British Pound (GBP) or British Pound uncompetitive.
It remains unclear whether major players will push for changes to recent proposals. Some argue that these rules should be adjusted to align more with U.S. regulations.
Unlike the current project, the American rules do not cap user assets. They also allow issuers to earn interest on reserve assets.
But more importantly, how to balance the potential flight of deposits from banks and keep the sterling-based stablecoin competitive.
At press time, Sterling-based offerings class 10th and accounted for just $261,000 of the $306 billion overall stablecoin supply – a dominance of less than 1%.
The US dollar led the market with 99% dominance, followed by the Euro.
Source: Artemis
Final Thoughts
- The UK parliament has launched an inquiry to assess the growth of the stablecoin, its potential impact and whether the proposed legislation addresses key risks and opportunities.
- It is part of wider feedback sessions as the government strives to finalize the rules by the end of this year.
