The House of Lords heard sharply critical evidence on stablecoins on Wednesday as part of a new inquiry into how those tokens should be regulated in the UK. The Financial Services Regulation Committee gathered testimony on stablecoins’ roles in payments, banking and financial stability, probing issues such as competition with banks, cross-border use, illicit finance risks and the implications of the US GENIUS Act.
Financial Times commentator Chris Giles told peers that stablecoins have largely failed to take off in the UK because of unclear legal foundations and an absence of robust regulation, making them risky for households to hold as money. He said a strong regulatory framework could make some transactions more efficient, cheaper and faster—particularly for cross-border and large corporate transfers—but remained skeptical that sterling stablecoins would displace banks given existing instant, low-cost payment systems.
Giles characterized current stablecoin use primarily as ‘on- and off-ramps’ into crypto rather than a new form of money with broad public use. On whether stablecoins should pay interest, he argued that if they operate solely as a payments technology there is no need for yield, noting that interest-bearing current accounts already exist without upending the banking system.
He welcomed the Bank of England’s proposal to treat stablecoins like money, endorsing strict backing requirements, resolution planning and an ultimate liquidity backstop to address very rapid runs. At the same time, Giles warned about the risk of illicit use, likening stablecoins to a new form of bearer cash, and urged stronger international oversight of exchanges alongside rigorous KYC and AML checks should stablecoin activity expand beyond its current niche.
US law professor Arthur E. Wilmarth Jr. expressed a more dismissive view of stablecoins as essential infrastructure, suggesting that tokenized bank deposits could better serve payment needs. He strongly criticized the GENIUS Act for allowing non-bank firms to issue dollar-denominated stablecoins, calling the bill a serious mistake. Wilmarth said the legislation risks regulatory arbitrage by enabling lightly regulated entities to enter the money business, thereby undermining long-established prudential protections in the banking system.
Wilmarth contrasted the US bill with what he described as the Bank of England’s more robust approach to stablecoin regulation. Both witnesses signaled the need for careful cross-border coordination, strong safeguards against illicit finance, and clear, well-enforced rules if stablecoins are to play a larger role in payments.
This reporting aims to be independent and accurate; readers are encouraged to verify details through official committee records and regulatory sources.