The House of Lords heard sharply critical testimony on stablecoins during a public session Wednesday as part of a new inquiry into how the tokens should be regulated in the UK. The Financial Services Regulation Committee (FSRC) gathered evidence on stablecoins’ roles in payments, banking and financial stability, questioning witnesses on competition with banks, cross‑border use, illicit finance risks and the implications of the US Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.
Financial Times commentator Chris Giles told the committee that stablecoins have not taken off in the UK largely because of an absence of clear legal foundations and regulation, making them risky for households to hold as money. He said a robust regulatory regime could make transactions and payments more efficient, cheaper and faster—especially for cross‑border and large corporate transfers—but remained skeptical about domestic sterling stablecoins displacing banks given existing instant, low‑cost payment systems.
Giles described current stablecoin use as primarily “on‑ and off‑ramps” into crypto rather than a new form of money, calling them of limited broader interest for now. On the question of whether stablecoins should pay interest, he argued that if they function purely as a payments technology there is no need to pay yield, and that interest‑bearing current accounts already exist without having upended the banking system.
He welcomed the Bank of England’s move to treat stablecoins “like money,” supporting strict backing requirements, resolution planning and an ultimate liquidity backstop to handle very rapid runs. At the same time, Giles warned about illicit use, noting stablecoins have been likened to “your new suitcases of cash,” and urged stronger international oversight of exchanges plus rigorous KYC and AML checks if stablecoins expand beyond their current niche.
US law professor Arthur E. Wilmarth Jr. took a more dismissive view of stablecoins as a necessary part of the financial system, arguing that tokenized bank deposits could serve the purpose better. He sharply criticized the GENIUS Act for allowing non‑bank firms to issue dollar‑denominated stablecoins, describing the bill as a “terrible” and “disastrous mistake.” Wilmarth said the legislation enables regulatory arbitrage by permitting lightly regulated entities to enter “the money business,” undermining prudential protections built into the banking system over centuries. He said he found little to agree with in the bill and contrasted it with what he saw as the Bank of England’s more robust proposed regime.
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