The U.K. parliament has launched a stablecoin inquiry to assess the sector and the effectiveness of the proposed regulation.
In a statement on the 29th January, the House of Lords Financial Services Regulation Committee (FSRC) called for evidence on the sector’s growth and adoption projections.
The inquiry’s scope covers opportunities and risks of the sector’s growth. This will include the impact on monetary control and the broader U.K. economy.
In addition, the probe will examine the competitiveness of Sterling-backed stablecoins globally.
Sheila Valerie Noakes, the Baroness Noakes DBE and the Chair of the FSRC, added that the inquiry will also,
“Assess whether the Bank of England and FCA’s proposed regulatory frameworks provide measured and proportionate responses to these developments.”
U.K’s proposed stablecoin regulation
Evidenced and expert submissions covering the core questions of the inquiry will be run up to the 11th of March 2026. This fits well within the U.K.’s push to finalize rules for the sector by the end of this year.
In late 2025, the Bank of England (BoE) published proposed regulations for Sterling-backed stablecoins, stressing that issuers’ reserve assets will be backed on a 60/40 formula. Which meant 60% of the reserve assets will be able to have exposure to U.K. government short-term bonds to earn interest.
The rest of 40% of the reserves will be parked with the BoE and won’t earn interest. Additionally, the regulators proposed a cap of £20K per individual and £10 million per business to mitigate financial stability risks.
Worth pointing out that the caps appeared to be a measured response to address the concerns seen from traditional U.S banks that fear deposit flight to stablecoins may derail credit availability.
Critics of the proposed rules
However, crypto supporters such as Stani Kulechov, the founder of the DeFi platform Aave, have criticized the proposals. He argued that capping interest-earning potential and holdings would make Great British Pound (GBP) or Sterling-based stablecoins uncompetitive.
It remains uncertain whether key players will push for changes to the recent proposals. Some argue these rules should be adjusted to align more closely with U.S. regulations.
Unlike the current draft, U.S. rules do not cap users’ holdings. They also allow issuers to earn interest on reserve assets.
But most importantly, how to balance potential deposit flight from banks and keep the GBP-based stablecoin competitive.
At press time, the Sterling-based offerings ranked 10th and accounted for only $261K of the $306 billion in overall stablecoin supply – A less than 1% dominance.
The U.S. dollar led the market with 99% dominance, followed by the Euro.
Final Thoughts
- The U.K. parliament has launched an inquiry to assess stablecoin growth, potential impact & whether proposed legislation addresses key risks and opportunities.
- This is part of broader feedback sessions as the government races to finalize rules by the end of this year.
