The House of Lords’ Financial Services Regulation Committee has launched a formal inquiry into stablecoins, while the Bank of England moves forward with their regulation and implementation. The inquiry aims to assess the innovation and risks associated with their integration into the market.
The UK House of Lords has launched an unprecedented inquiry into the growth and proposed regulation of stablecoins, focusing on instruments denominated in pounds sterling and their impact on traditional intermediaries and monetary policy.
The inquiry committee has requested reports and scheduled public hearings to gather evidence and information on the proportionality and effectiveness of the proposed regulatory frameworks from the Bank of England and the Financial Conduct Authority (FCA).
A public hearing is scheduled for February 4, where the first steps of the inquiry are expected to be taken. The investigation will conclude on March 11, the deadline for submitting written evidence to the House of Lords. The inquiry will examine how the adoption of stablecoins could affect price stability, market structure, and the prevention of financial crime.
Bank of England framework: strong backing and access to the BoE
The Bank of England is developing a prudential regime for systemically important stablecoins denominated in pounds sterling, defined as tokens whose use in UK payments could pose risks to national financial stability.
Some of the key issues to be addressed with the FCA include rules on backing assets and direct access to central bank facilities. Under the proposed design, issuers could hold up to 60% of their reserves in short-term UK government debt. However, under the proposed rules, stablecoins must be backed by at least 40% of their reserves at the Bank of England.
The FCA is prioritizing stablecoin payments by 2026 and remains responsible for market conduct, consumer protection, and integrity. The Treasury-backed interim legislation, the Financial Services and Markets Act 2000 Cryptoasset Regulations 2025, was submitted to Parliament in December 2025 and is expected to be enacted during 2026.
Investors, payment providers, and issuers are closely watching the Bank of England’s policy statement in the first half of 2026 and the Lords hearings; these will be crucial tests to determine whether the planned combination of reserve rules, central bank access, and joint supervision can enable widespread and secure use of stablecoins while safeguarding monetary policy transmission and financial stability.
