On January 29, the UK House of Lords Financial Services Regulation Committee announced the launch of a formal inquiry into the growth of stablecoins and proposed regulatory frameworks, inviting written submissions from stakeholders.
The inquiry aims to systematically assess the role of stablecoins within the UK financial system and evaluate whether existing and proposed regulatory arrangements are forward-looking and operationally effective.
Scope Covers Market Development and International Comparisons
The Committee stated that the inquiry will review the evolution of the global stablecoin market and issuance trends since 2014, while comparing the UK’s regulatory approach with those of major jurisdictions such as the United States and the European Union.
A key focus is to assess the UK’s position in terms of stablecoin market development pace and regulatory maturity.
Focus on GBP Stablecoins and Real-World Use Cases
The inquiry will place particular emphasis on the potential development of GBP-denominated stablecoins, including their target users, practical use cases, and how existing regulatory rules may affect their adoption and scalability.
The usage of USD-denominated stablecoins within the UK market will also be examined as part of the review.
Assessing Potential Impacts on the Financial System and Financial Crime
The Committee noted that while stablecoins may bring efficiency gains and innovation to the UK economy, financial services sector, and retail users, they could also affect monetary policy transmission, traditional financial intermediation structures, and financial crime risks.
The analysis will cover key issues such as anti-money laundering, fund flow transparency, and cross-border payments.
Review of Statutory Objectives and Regulatory Coordination
The inquiry will further evaluate the implications of stablecoin development for the statutory objectives of the Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA).
It will also assess the applicability of proposed regulatory regimes by the BoE and FCA to both systemic and non-systemic stablecoins, with a focus on institutional coherence.
On-Chain Transparency Becomes a Key Regulatory Consideration
As discussions on stablecoin regulation deepen, on-chain transaction traceability and risk identification capabilities are increasingly becoming critical reference points in regulatory design.
Through on-chain monitoring and analytical frameworks such as Trustformer KYT, regulators and market participants can gain clearer visibility into stablecoin fund flows and potential risks, providing data-driven support for regulatory assessments.
Advancing Regulatory Prudence Alongside Market Feedback
Baroness Noakes, Chair of the Committee, stated that the inquiry seeks to comprehensively assess the opportunities and risks that stablecoin growth presents to the UK financial system and the broader economy, while examining whether the proposed frameworks by the Bank of England and the FCA remain “proportionate and prudent.”
The Committee welcomes written submissions from institutions and individuals with relevant expertise or research interest in this field.