The U.K. has opened a formal inquiry into sterling-backed stablecoins as policymakers weigh whether proposed rules could hobble the market and cede ground to U.S. dollar-dominated offerings.
On 29 January the House of Lords Financial Services Regulation Committee (FSRC) launched a call for evidence into the sector’s growth, adoption prospects and risks — including implications for monetary control and the broader U.K. economy. The committee said it will also examine how competitive sterling-backed stablecoins are internationally and “assess whether the Bank of England and FCA’s proposed regulatory frameworks provide measured and proportionate responses to these developments,” Baroness Sheila Noakes, chair of the FSRC, said in the statement. Submissions from experts and stakeholders will be accepted until 11 March 2026.
The inquiry comes as the Bank of England in late 2025 proposed a conservative regulatory blueprint for GBP-backed stablecoins. Key features include:
- A 60/40 reserve split: up to 60% of reserve assets may be invested in short-term U.K. government bonds (gilts) to earn interest, while the remaining 40% would be held at the BoE and not earn interest.
- Holding caps intended to limit financial-stability risks: a £20,000 maximum per individual and £10 million per business.
Regulators say such limits are intended to reduce the risk of deposit flight from traditional banks — a concern raised by some in the banking sector — but the proposals have prompted pushback from crypto-native voices. Stani Kulechov, founder of DeFi platform Aave, argued the caps and restrictions on interest-earning reserves would “make Sterling-based stablecoins uncompetitive” versus alternatives issued under laxer regimes.
That comparison matters: U.S. rules being discussed do not impose per-user holding caps and generally permit issuers to earn interest on reserve assets, which proponents say makes dollar-linked stablecoins more attractive for users and issuers. At present, sterling-based stablecoins occupy a tiny sliver of the market — ranked 10th by supply and accounting for roughly $261,000 of the global stablecoin pool, which totals about $306 billion — under 1% market share. The U.S. dollar dominates with roughly 99% of supply, followed by the euro.
What happens next
The FSRC’s evidence-gathering will feed into wider U.K. efforts to finalize stablecoin rules by the end of the year. Industry groups, crypto firms and financial institutions now have until 11 March to submit views that could press regulators either to keep the conservative guardrails or to relax them to preserve competitiveness with U.S. markets.
Sources: Bank of England; market data via Artemis. Reporting and original compilation: AMBCrypto. Note: this article is informational and not investment advice.
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