The United Kingdom's House of Lords Financial Services Regulation Committee (FSRC) held a public evidence session on Wednesday as part of a new inquiry into stablecoin regulation. Witnesses presented critical views, arguing that stablecoins currently function primarily as "on- and off-ramps into crypto" rather than representing the future of money.
Chris Giles, an economics commentator for the Financial Times, testified that stablecoins have not gained widespread adoption in the UK due to the lack of "clear legal underpinning and clear regulation," making it risky for households to hold them as money. He stated that with a robust regulatory regime, the main opportunities for stablecoins would be making transactions "more efficient, cheaper, potentially faster than currently," particularly for cross-border and large corporate transfers.
Giles expressed skepticism that sterling-denominated stablecoins could meaningfully disintermediate UK banks, given the existence of instant, low-cost domestic payment systems. He characterized their current use as conduits for "an intrinsically worthless asset" and said they are "not massively interesting or going to take over the world." He welcomed the Bank of England's shift toward regulating stablecoins "like money" with strict backing rules and resolution plans, but warned they are attractive for illicit use, describing them as "your new suitcases of cash." He emphasized the need for stronger international oversight of exchanges and enhanced KYC/AML checks.
Arthur E. Wilmarth Jr., a U.S. law professor, provided a harsher critique. He stated he does not regard stablecoins as "a natural component of the financial system," suggesting tokenized bank deposits could be superior. He strongly criticized the U.S. Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, calling it a "terrible" and "disastrous mistake" for allowing non-banks to issue dollar-denominated stablecoins.
Wilmarth described stablecoins as a form of "regulatory arbitrage" that enables lightly regulated firms to enter "the money business" while undermining prudential banking frameworks built "over centuries." He noted he had a "hard time agreeing with anything in the bill" but acknowledged that the Bank of England was proposing a more robust regulatory regime than the U.S.
The inquiry seeks to understand stablecoins' role in payments, banking, and financial stability, as well as their competitive impact on banks, cross-border use, and illicit finance risks. The Bank of England and the Financial Conduct Authority (FCA) are working to establish a regulatory framework for systemic stablecoins by the end of 2026.
