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UK Parliament Initiates Comprehensive Review of Stablecoin Regulations

The U.K. Parliament has officially launched an inquiry into stablecoins to evaluate their growth and the proposed regulatory framework.

This inquiry is organized by the House of Lords Financial Services Regulation Committee and seeks to gather evidence on the opportunities and risks associated with stablecoin adoption.

Key aspects under review include the potential impact on monetary control and the overall U.K. economy, as well as the global competitiveness of Sterling-backed stablecoins.

Baroness Noakes, Chair of the FSRC, emphasized the inquiry’s goal to determine if current regulatory proposals by the Bank of England and the FCA are adequate.

The call for evidence will remain open until March 11, 2026, aligning with the U.K.'s goal to finalize stablecoin regulations by the year's end.

The Bank of England has proposed regulations that maintain a 60/40 reserve asset ratio for Sterling-backed stablecoins, with caps to mitigate financial risks.

However, these proposed caps have attracted criticism, with industry leaders suggesting they could undermine the competitiveness of GBP-based stablecoins compared to U.S. counterparts.

As the inquiry progresses, discussions surrounding the balance between ensuring financial stability and fostering innovation in the stablecoin sector will be crucial.

Currently, Sterling-backed stablecoins have a minimal presence in the market, accounting for just a fraction of the total stablecoin supply.

The outcome of this inquiry and subsequent regulations will undoubtedly shape the future development of digital financial markets in the U.K.