The Financial Services Regulation Committee, a House of Lords body chaired by Baroness Noakes DBE that scrutinises financial regulation, has published a report warning that the UK’s framework for stablecoins is not keeping pace with international rivals and calling on regulators to stick to existing deadlines.
The committee’s central finding is that the UK trails both the United States and the European Union in building out its stablecoin regulatory framework. It is urging the Bank of England and the Financial Conduct Authority (FCA) to honour their current timetables and warns that any slippage in delivering a final regime would be unacceptable. The report was the product of an inquiry launched in January into the growth of the stablecoin market and the proposals put forward by both regulators.
Beyond the pace of reform, the committee identified a number of areas where the UK’s proposed approach diverges from frameworks being developed elsewhere. These include the requirement for systemic issuers to hold unremunerated backing assets, proposed caps on stablecoin holdings, and restrictions that would prevent commercial banks from issuing stablecoins. The committee also called on the Bank of England to carry out more detailed modelling of what holding limits would mean for high-value use cases.
On the question of illicit finance, the report calls on HM Treasury to work with the Bank of England and the FCA to assess whether existing legal tools are adequate to detect and prevent misuse of private, unhosted, and unregulated wallets, and to be ready to bring forward legislation restricting their use if the current framework proves insufficient. HM Treasury is also asked to provide greater clarity on how it will determine whether a stablecoin meets the threshold to be deemed systemic. Separately, the committee questioned whether a k-factor requirement for stablecoin issuers, one that scales upward with issuance volume, is the right approach, and has asked the FCA to reconsider the measure.
The Financial Services Regulation Committee is a select committee of the House of Lords responsible for examining financial services legislation and regulatory proposals. Its January inquiry focused on the expansion of stablecoins in the UK and assessed the regulatory positions advanced by both the Bank of England and the FCA.
Financial Services Regulation Committee chair Baroness Noakes said, “The global stablecoin market is dominated by US dollar stablecoins and evolved to serve cryptoasset trading. New uses for stablecoins are emerging and regulators globally are setting up regulatory regimes. The UK is lagging behind compared with the US and the EU but is now moving in the right direction.”
She added, “The committee support much of what the Bank of England and Financial Conduct Authority are proposing. There are, however, elements of the proposals which should be reconsidered, particularly in relation to holding limits, unremunerated backing assets, and restrictions on commercial banks issuing stablecoins.”
Baroness Noakes said, “No-one knows whether or how a UK-based stablecoin market could develop. Regulation needs to allow innovation while ensuring that risks are effectively mitigated. The shape of any UK stablecoin market will be strongly influenced by the direction of the regulatory regime, and so it is important that the regulators get this balance right.”
Copyright © 2026 RegTech Analyst
Copyright © 2018 RegTech Analyst
