UK Lords Open Inquiry as Bank of England and FCA Tighten Rules Around Stablecoins

The House of Lords Financial Services Regulation Committee has launched a targeted inquiry into proposed UK stablecoin regulation, inviting written evidence and setting a March 11, 2026 deadline for submissions. Lawmakers plan to test whether the frameworks put forward by the Bank of England and the Financial Conduct Authority strike the right balance between innovation, competition and financial stability. The BoE’s draft positions treat widely used fiat-linked tokens as potential components of monetary plumbing and set out options — including the prospect of direct central bank accounts or liquidity backstops for systemic stablecoins. Those proposals come with a draft minimum backing arrangement that would require a material share of reserves to be held in central bank deposits (set in the draft at least 40%), reflecting concern that large-scale stablecoin use could siphon deposits from commercial banks and compress credit availability. The FCA is advancing a complementary consultation on broader crypto market rules and expects to close its consultation cycle ahead of a phased implementation stretching toward October 2027. The Lords’ inquiry will scrutinise operational resilience, consumer protection, access to payments infrastructure and the interplay between stablecoin arrangements and existing banking regulation. The initiative sits in a growing pattern of global policymaking: Japan’s financial regulator has proposed narrow eligible-reserve rules and supervisory guidance to limit counterparty and liquidity risks, while industry studies such as Standard Chartered’s modelling highlight measurable deposit and net-interest-margin (NIM) pressures when stablecoin issuance expands without re-depositing reserves into domestic banks. Those international examples sharpen the UK debate by emphasising reserve location, asset quality and information-sharing as practical levers for containment. Stakeholders making technical submissions can influence choices on reserve composition, custody, access to central bank facilities and stress-testing expectations; the committee’s public hearings will surface trade-offs between liquidity backstops, competitive openness and operational cost. For stablecoin issuers, the combined regulatory choreography raises the prospect of higher custody, liquidity and disclosure obligations; for banks, material deposit erosion could force funding and pricing adjustments. The inquiry’s recommendations — and the final design choices by the BoE and FCA — will have political and technical weight in determining whether the UK adopts stricter containment measures or a lighter-touch model prioritising market access.