The United Kingdom's House of Lords Financial Services Regulation Committee held a critical hearing on stablecoin regulation, grilling Coinbase's top international policy executive, Tom Duff Gordon. The session focused on whether stablecoins pose systemic risks to the UK financial system, including fears of bank deposit drains and potential for illicit finance.
During the inquiry, Duff Gordon, Coinbase's Vice President for International Policy, staunchly defended regulated stablecoins, arguing they are "safer than uninsured bank deposits" because they are fully backed one-to-one by cash and high-quality government securities. He emphasized their potential to reduce payment costs, speed up cross-border transactions, and enable new AI-driven payment systems.
The Lords committee repeatedly challenged Duff Gordon on key risks, including who bears redemption risk in a crisis and whether stablecoins could trigger a "deposit drain" from traditional UK banks. Duff Gordon countered that these fears were "wildly exaggerated," noting that major corporations already use stablecoins to cut payment costs.
A central point of contention was the Bank of England's proposed temporary holding limits for systemic sterling stablecoins: £20,000 for individuals and £10 million for businesses. Duff Gordon warned these caps would prevent sterling stablecoins from reaching the scale needed to function as serious settlement infrastructure for tokenized capital markets, such as for tokenized gilts and bonds. "The risk is that the caps, however well-intentioned, prevent sterling stablecoins from ever reaching the point where they are genuinely useful," he stated in prepared remarks.
Duff Gordon pushed back against suggestions that Coinbase sought to dodge Know Your Customer (KYC) obligations, highlighting the company's Anti-Money Laundering (AML) and sanctions screening. He argued that on-chain transparency could make illicit flows easier to police than traditional cash.
The executive framed 2026 as a vital year for the UK, warning that overly tight proposals from the Bank of England and Financial Conduct Authority (FCA) on capital and holding limits risked choking off competition. He cautioned that the UK could fall behind the United States' GENIUS Act and the European Union's Markets in Crypto Assets Regulation (MiCA), becoming "a bit of a laggard" in the global race for stablecoin innovation.
Adam Jackson of Innovate Finance, a UK fintech industry body, echoed this concern, stating the UK risked creating a regime "more prescriptive and less competitive" than the EU's.
Duff Gordon presented five key recommendations for UK policymakers: drop the Bank of England's holding limits; allow a higher share of reserves in short-dated UK government debt; enable stablecoins in wholesale settlement; pursue international rule compatibility; and permit distributors like Coinbase to pay rewards to stablecoin holders.
Coinbase UK CEO Keith Grose separately emphasized the need for a workable framework through timely authorizations and reliable banking access, warning that unclear rules could push innovation offshore.
