UK Lords Hear Stablecoin Criticism, Warn GENIUS Act Risks Non‑bank Money Issuers
The UK House of Lords Financial Services Regulation Committee held a public hearing on stablecoin regulation, with witnesses arguing stablecoins are mainly "on‑ and off‑ramps" into crypto rather than the future of money. Financial Times commentator Chris Giles said lack of clear legal underpinning and regulation has kept sterling stablecoins from mainstream use and limited households’ willingness to hold them as money. Giles acknowledged potential efficiency gains—cheaper, faster payments, especially cross‑border and large transfers—but doubted domestic stablecoins would displace banks given existing instant, low‑cost payment rails. He urged strict Bank of England oversight, including backing rules, resolution plans and a liquidity backstop, and warned of increased illicit finance risks without stronger KYC/AML and exchange oversight. US law professor Arthur E. Wilmarth Jr. described the US GENIUS Act—permitting non‑banks to issue dollar‑pegged stablecoins—as a "disastrous" regulatory arbitrage that undermines century‑old prudential banking frameworks. He said tokenized deposits would be a safer alternative and commended the Bank of England’s proposed tougher regime. Key themes: regulatory clarity, Bank of England oversight, GENIUS Act criticism, AML/KYC and financial‑stability concerns. Primary keywords: stablecoins, regulation, GENIUS Act, Bank of England, AML/KYC.
Neutral
The hearing is regulatory and cautionary rather than market‑moving: senior commentators urged stricter oversight and criticised the US GENIUS Act, which may slow liberalization of stablecoin issuance but supports stronger prudential rules. Short‑term market impact is likely muted—no new bans or immediate policy changes were announced—though the critical rhetoric increases regulatory uncertainty which can weigh on stablecoin and risk‑asset sentiment. If the UK follows through with tougher rules (backing, resolution and liquidity backstops), that could reduce redeemability and issuance risk and ultimately strengthen market confidence in high‑quality, fully backed stablecoins—a constructive long‑term outcome. Conversely, stricter rules could raise compliance costs and limit some stablecoin products, potentially reducing supply and liquidity in certain venues. Historical parallels: regulatory scrutiny (e.g., after the Terra/LUNA collapse and subsequent US proposals) depressed risk appetite short term but improved trust in well‑regulated stablecoins over time. Traders should monitor formal UK/BoE rule proposals and any alignment or divergence from US policy (GENIUS Act) for implications on stablecoin liquidity, funding costs and cross‑border flows.