Signet Stack Ltd – Written Evidence (STA0057)
Written Evidence Submission: Stablecoins in the UK
House of Lords – Financial Services Regulation Committee (Inquiry into Stablecoins)
Date: 10 March, 2026
Submitted by: Johnson Ogúndѐjì, Signet Stack Ltd, Director
1. Generative AI tools were used to assist with research, drafting and source discovery. The submitter has reviewed, edited, and takes full responsibility for the contents of this submission. 1
2. Signet Stack Ltd is Entreprise Business Software Development, Consulting and Research organization incorporated in the UK since November 2020.
2. This submission responds to the Committee’s Call for Evidence questions 1–6 and addresses key concerns raised in the Committee’s oral evidence sessions on 4 February 2026. 1,2,3
Key findings
Headline recommendations
3. The Committee’s questions implicitly cover multiple phenomena: (i) stablecoins used as ‘crypto-market plumbing’ (exchange settlement, on-chain trading), (ii) stablecoins used for real‑economy payments (retail and business payments), and (iii) stablecoins used as settlement assets for tokenised securities or wholesale flows. Sound regulation should distinguish these use-cases rather than treating ‘stablecoins’ as a single undifferentiated product class. 1,11
4. A stablecoin arrangement is best understood as a system with three core functions: (1) issuance/redemption and stabilisation, (2) transfer/settlement, and (3) user-facing interfaces such as wallets and exchanges. This functional framing is important because risks (and the right mitigations) differ by function and by the part of the chain where UK regulators can exert control. 9
5. In UK law and policy, stablecoins used for payments sit inside the broader category of ‘digital settlement assets’ (DSA), defined in the Banking Act 2009 and brought within the Bank of England’s remit (for systemic cases) through FSMA 2023. The Bank’s consultation paper provides the operative definition and the proposed allocation of responsibilities between HM Treasury (recognition), the Bank (prudential/systemic), and the FCA (conduct/consumer/competition). 4
6. This submission uses four categories that are materially relevant for regulation: (a) fiat‑backed single‑currency stablecoins (e.g., GBP‑ or USD‑pegged), (b) asset‑referenced multi‑asset tokens, (c) algorithmic or under‑collateralised constructs (which have a history of depegs and reflexive ‘run’ dynamics), and (d) tokenised deposits (bank liabilities represented on-chain) which can be complementary to stablecoins but are not identical in legal form or in access model. 13,15
7. The Committee’s oral evidence highlighted a core monetary principle: the ‘singleness of money’ (that £1 should be £1 regardless of issuer or wallet), and the corresponding need to prevent ‘walled-garden’ money (e.g., ‘Amazon money’) through interoperability and credible redemption rules. This submission adopts that principle and proposes implementation levers to achieve it without banning innovation. 2,4
8. Stablecoins have developed in three broad phases. First (2014–2017), small-scale experiments and early fiat-backed tokens emerged, primarily to facilitate trading between cryptoassets without repeatedly touching the banking system. Second (2018–2021), fiat-backed stablecoins became core settlement instruments for centralised exchanges and began to appear in on-chain applications. Third (2022–present), the market expanded further, regulatory attention intensified, and stablecoins began to be assessed explicitly as potential payment instruments and as components of ‘tokenised finance’. 13,15
9. The global market has grown rapidly and remains highly concentrated. BIS evidence shows market capitalisation rising from about US$125bn (less than two years before June 2025) to around US$255bn by June 2025, with around 90% of market value accounted for by two issuers. The reference asset is overwhelmingly the US dollar: BIS evidence indicates almost 99% of stablecoin market value is USD-denominated (mid‑2025). 12
10. Stablecoins are not uniformly ‘stable’ in practice. BIS research that studies dozens of stablecoins over a decade finds that none maintained parity with their peg at all times, highlighting why credible backing assets, clear redemption rights, and effective governance are not optional if stablecoins are to be used in mainstream payments. 13
11. Cross-border payments is one of the most frequently cited ‘real-economy’ use-cases. CPMI analysis describes how stablecoin arrangements can, in principle, contribute to faster or cheaper cross-border payments, but stresses that benefits depend on the full arrangement (governance, redemption, compliance, and the on/off ramps), and that risks to integrity, consumer protection, and financial stability must be addressed through appropriate design and regulation that is proportionate to risks. 11
12. UK market comparison: the UK has strong domestic retail payments infrastructure, so its near-term opportunity is less about replacing card payments and more about (i) cross-border settlement and SME trade, (ii) programmable B2B payments, and (iii) tokenised asset settlement. UK policy is nevertheless moving decisively to create a regulated perimeter for stablecoin issuance, custody and payments activity under HM Treasury and FCA rules, with a separate Bank of England regime for systemic stablecoins once recognised by HM Treasury. 8,6,4
13. US comparison: the United States enacted a federal framework for ‘payment stablecoins’ through the GENIUS Act (Public Law 119‑27, signed 18 July 2025). Public summaries emphasise 100% reserve backing with liquid assets and public disclosure obligations, illustrating that the US is pursuing a ‘permit stablecoins, but make them bank-grade’ approach to reserve quality and transparency. 20,21
14. EU comparison: the EU’s Markets in Crypto-Assets Regulation (MiCA) creates a harmonised regime for cryptoassets, including asset-referenced tokens (ARTs) and e-money tokens (EMTs). EU authorities require issuer authorisation and supervision (with a significant-token regime), and the EBA and ESMA provide supervisory and implementation materials. For UK firms seeking EU access, MiCA creates a clear set of expectations on authorisation, disclosure and governance, but also creates compliance costs that can shape where innovation locates. 18,19
15. Sterling stablecoins in the UK are best viewed as an ‘option value’ technology: the UK does not need stablecoins to make domestic card payments work, but it does need credible digital settlement assets to compete in cross-border payments, tokenised finance, and programmable commerce. The likely path is incremental: regulated pilots → scaling in specific corridors/use‑cases → potential systemic designation only if a coin/payment system becomes widely used for UK payments. 4,16
16. Near-term UK adoption is most likely to be driven by regulated firms experimenting through FCA-supervised channels. For example, Reuters reported that Revolut planned a trial of a pound-pegged stablecoin within an FCA sandbox environment (reported 25 February 2026). Regardless of the specific firm, this ‘trial → learn → iterate’ pathway is the appropriate sequence for protecting consumers while enabling experimentation. 23,7
17. Who uses stablecoins today, and why (generalised): (i) market participants in cryptoasset trading and settlement (speed, 24/7 settlement, reduced banking frictions), (ii) users with cross-border payment needs (remittances, international freelancers/SMEs) where stablecoins can reduce intermediary layers, and (iii) developers and users of on-chain applications that require a ‘unit of account’ and settlement asset. 11,12
18. For sterling stablecoins specifically, the addressable UK user base depends on whether the token can be (a) redeemed at par into UK bank money reliably, (b) held in wallets that meet UK consumer and financial crime expectations, and (c) used interoperably across payment interfaces rather than being trapped in closed ecosystems. 4,2
19. Existing and emerging UK rules impacting growth: HM Treasury is proposing to implement new regulated activities for cryptoassets (including stablecoin issuance and related activities) through a new FSMA-based perimeter, with detail provided in the draft Cryptoassets Order 2025 and policy note. The FCA is consulting on rules for issuing a ‘qualifying stablecoin’ and for safeguarding qualifying cryptoassets (including stablecoins). This will materially shape business models, reserve practices, custody, and consumer outcomes. The Bank of England’s systemic regime would apply once HM Treasury recognises a stablecoin payment system/service provider as systemic. 8,6,4
20. A key UK design choice is the backing-asset model. The Bank of England consultation proposes allowing systemic stablecoin issuers to hold backing assets partly in central bank deposits and partly in short-term sterling government securities, reflecting a balance between safety/liquidity and viable revenue models. The FCA’s consultation similarly focuses on reserve quality, redemption, and safeguarding/custody rules for non-systemic stablecoins. 4,6
21. Finally, UK policy must recognise that USD stablecoins will continue to be used globally and could become systemic in the UK if widely used for UK payments. The Bank of England consultation explicitly considers an approach for non-sterling systemic coins, including engagement with the home authority and the possibility of deferring to equivalent overseas regimes where appropriate. 4
22. Opportunities for the UK economy and financial services (sterling and USD stablecoins): Stablecoins can serve as a 24/7 settlement layer that supports new forms of digital commerce and reduces settlement frictions where current correspondent banking and card rails are slow or costly (notably cross-border). CPMI analysis recognises the potential for stablecoin arrangements to contribute to faster/cheaper cross-border payments, subject to design and regulatory conditions. 11
23. For UK financial services, the strategic opportunity is to export a ‘compliance-first’ stablecoin architecture: UK-authorised issuers and wallet providers that can operate globally under high standards, similar to how the UK historically exported trust frameworks in financial services. This is compatible with the FSB’s call for consistent, comprehensive frameworks to reduce regulatory arbitrage. 9,10
24. Stablecoins can also act as settlement legs for tokenised assets (delivery-versus-payment and atomic settlement), bridging payments and capital markets innovation. BIS work on ‘unified ledger’ approaches and Project Agorá highlights the direction of travel: tokenised deposits and tokenised central bank money are being tested for wholesale cross-border settlement, and stablecoins may coexist as private settlement assets under appropriate governance. 16,17
25. For retail customers, benefits are most credible in cross-border and online contexts: reduced waiting times, potentially lower fees and improved transparency, and programmable features such as escrow and conditional release of funds. However, these benefits are not automatic; they depend on competition in wallet/on-off ramp markets and on consumer protection rules that ensure redemption certainty and clear disclosures. 11,6
26. Financial stability risks (runs and contagion): Stablecoins are susceptible to redemption runs if coinholders doubt reserve quality, liquidity, or redemption enforceability. BIS analysis notes stablecoins’ growing interconnections with the traditional financial system and highlights that spillovers can no longer be ruled out as stablecoin scale increases. 12
27. Evidence relevant to monetary policy and safe-asset markets: BIS evidence indicates that stablecoin issuers have become meaningful participants in short-term government debt markets (eg, US Treasury bills), and that stablecoin market capitalisation can respond to changes in short-term interest rates (declining during periods of monetary tightening), consistent with opportunity-cost channels. This creates a plausible mechanism through which large stablecoins could interact with monetary and liquidity conditions even if they are not bank deposits. 12
28. Disintermediation of traditional intermediaries: the strongest channel is large-scale migration from bank deposits into stablecoins for day-to-day holding. This risk is primarily about domestic-currency systemic stablecoins used widely in payments. The Bank of England’s proposed systemic regime is explicitly designed to mitigate these risks through constraints on backing assets, resilience requirements, and joint regulation. In the UK context, broad retail migration into USD stablecoins is less likely for routine domestic spending because taxes, wages and most payments are sterling; nevertheless, USD stablecoins can matter for cross-border commerce and as a store-of-value for some users. 4,2
29. Operational and technology risks: failures in custody, wallet security, governance, or smart contract infrastructure can cause consumer harm and undermine confidence. Professor Wilmarth’s oral evidence stressed the difficulty of reversing transactions on public permissionless blockchains (‘immutability’) and the risk of theft or hacks. These concerns strengthen (rather than weaken) the case for a regulated wallet model for mainstream payments and for clear liability and dispute-resolution rules. 3
30. Financial crime considerations: stablecoins can be used for illicit transfers, but they are also traceable and increasingly subject to issuer and intermediary controls. Chainalysis reports that stablecoins represent the majority share of illicit transaction value in its crypto-crime estimates (for the period covered by its 2025 report), while also noting that stablecoin issuers can and do freeze funds once alerted to illicit use. This creates a clear policy implication: UK controls should focus on regulated wallets, exchanges, and redemption/on-off ramps (where identity, screening and reporting can be enforced), rather than assuming stablecoins are inevitably anonymous ‘digital cash’. 22,9
31. The Committee’s oral evidence expressed a public concern that stablecoins could become ‘new suitcases of cash’. A proportionate UK response is to (i) require strong AML/KYC for retail payment wallets, (ii) implement travel-rule compatible information sharing for transfers involving regulated cryptoasset service providers, (iii) require robust sanctions screening and suspicious activity reporting at the redemption/on-off ramp layer, and (iv) ensure law enforcement has practical pathways to obtain data and freeze/seize assets where appropriate. 2,10,6
32. Price stability and monetary policy: the main objective risk arises if a sterling stablecoin becomes systemic and materially alters money demand, deposit composition, or payment settlement dynamics. International policy work emphasises safeguarding monetary sovereignty and ensuring that cryptoasset/stablecoin growth does not weaken macroeconomic policy frameworks. The appropriate UK response is not prohibition but enforceable constraints: high-quality reserves, credible redemption, and—if scale warrants—systemic oversight with prudential requirements and, where justified, carefully designed central bank facilities with strong safeguards against moral hazard. 14,4
33. Financial stability: stablecoin runs and operational failures are the key risks. The FSB’s recommendations and peer review work emphasise comprehensive frameworks for governance, risk management, reserve management, and effective cross-border cooperation. The Bank of England’s systemic regime proposals are aligned with this direction by setting expectations for backing assets, resilience, and location/subsidiarisation for sterling systemic stablecoins. 9,10,4
34. Market integrity: for stablecoins to support legitimate finance, the market must prevent manipulation, misleading disclosures, and conflicts. FCA proposals on issuance and custody (including safeguarding and disclosure expectations) are central to market integrity, while the FSB’s framework supports consistent oversight of stablecoin functions across borders. 6,9
35. Consumer protection: the principal consumer protection requirement is that ‘stable’ means stable in redemption terms—clear, enforceable par redemption, and protections around custody/segregation and operational resilience. FCA consultation proposals on issuing qualifying stablecoins and safeguarding qualifying cryptoassets are therefore foundational, and should be paired with practical dispute-resolution and clear liability allocation across the payment chain (issuer, wallet, and intermediaries). 6
36. Competition: a UK regime that allows both banks and non-banks to issue stablecoins (subject to bank-grade safeguards when the function is money-like) can expand competition in payments and settlement. Competition policy should also prevent ‘walled garden’ money and ensure interoperability so that large platforms cannot lock consumers into closed payment loops. The Bank’s consultation and the Committee’s oral evidence both stress interoperability as a requirement to preserve trust in the monetary system. 4,2
37. International competitiveness and growth: the UK can credibly position itself as a ‘regulated hub’ for stablecoin issuance, wallets and tokenised settlement by aligning domestic rules with international standards (FSB/IOSCO/CPMI) while offering clear authorisation pathways and sandbox-based pilots. The FSB’s peer review highlights that uneven implementation creates opportunities for regulatory arbitrage; the UK can capture legitimate activity by being early, clear and rigorous. 10,7
38. The Bank of England’s systemic regime and the FCA’s non-systemic regime, taken together, create a sensible ‘ladder of obligations’: firms can innovate under FCA rules for non-systemic qualifying stablecoins, while a higher prudential bar applies if a coin/payment system becomes systemically important and is recognised by HM Treasury. This tiering is aligned with the principle of proportionality and reduces the risk of imposing systemic-grade burdens on early-stage pilots. 4,6,8
39. However, the transition boundary between FCA-only and joint Bank/FCA regulation will require careful design to avoid ‘cliff effects’ (sudden, disruptive compliance jumps) that could push activity offshore. The Bank explicitly notes the intention to consult jointly with the FCA on the detailed design of the joint framework and to provide clarity on how remits apply in practice. This work should be prioritised and accompanied by clear supervisory ‘pre‑recognition’ engagement for firms approaching systemic scale. 4
40. Backing assets and business model viability: the Bank’s consultation proposes allowing systemic issuers to hold a mix of central bank deposits and short-term sterling government securities. This is a pragmatic response to industry feedback that a central-bank-deposits-only model may be incompatible with stablecoin revenue models. The challenge is to calibrate the mix so that it preserves high liquidity under stress while avoiding incentives for maturity transformation or ‘shadow banking by stablecoin’. 4
41. Location and supervision: the Bank proposes that non‑UK based issuers of sterling-denominated systemic stablecoins should establish a UK subsidiary and hold backing assets and capital-funded assets in the UK. This improves legal clarity and supervisory reach but may reduce the attractiveness of the UK for globally distributed issuers. The policy choice should therefore be paired with an equivalence pathway (for non-sterling systemic coins) and with clear, time‑bounded authorisation processes for UK subsidiaries to keep the UK competitive while remaining safe. 4
42. Wallet model and unhosted wallets: the Bank’s consultation recognises stakeholder views supporting unhosted wallets (for direct user control) while also noting the role of custodial wallets and the FCA’s custodial rules. For everyday retail payments, a default requirement for regulated custodial wallets is the most reliable route to consumer protection and financial crime controls, with risk-based carve-outs where justified (eg, low-value, low-risk transfers). 4,6
43. Consumer outcomes and dispute resolution: Professor Wilmarth emphasised the practical difficulty of reversing transactions on public permissionless blockchains. For mainstream payments, UK rules should therefore require wallet and payment-chain designs that support error correction, fraud response, and consumer redress (through governance rules, controlled rollback mechanisms where appropriate, and clear liability allocation). This is not a purely technical question; it is a consumer protection and market integrity question that should be made explicit in FCA rules. 3,6
44. Cross-border and non-sterling systemic coins: the Bank proposes engagement with home authorities and potential deference where overseas frameworks deliver broadly equivalent outcomes and cooperation arrangements are sufficient. This is essential for USD stablecoins given their dominance by market value. The UK should operationalise this via memoranda of understanding, common disclosure templates, and agreed stress/liquidity information-sharing so that the UK can manage risks without attempting unilateral control over global dollar stablecoins. 4,12,9
45. From the US: the GENIUS Act illustrates a policy choice to permit payment stablecoins under a federal framework with strict reserve backing and disclosure obligations. A UK lesson is that market credibility requires explicit, enforceable reserve and disclosure rules—otherwise ‘stable’ becomes a marketing term rather than a consumer protection promise. A second lesson is that regulatory clarity can accelerate mainstream experimentation (including by banks and large fintechs), which the UK can match through timely finalisation of its FCA and joint regimes. 20,21,6
46. From the EU: MiCA provides a harmonised regime for cryptoassets, including ARTs and EMTs, anchored on authorisation, disclosure and governance. The UK can learn from MiCA’s clarity and supervisory architecture (including the EBA’s role for significant tokens), while avoiding overly burdensome compliance that drives UK-facing innovation offshore. UK rules should remain outcome-focused and proportionate, but compatible enough that UK firms can passport credibility internationally. 18,19,9
47. From global standards: the FSB’s high-level recommendations emphasise governance, risk management, reserve management, recovery/resolution planning, and cross-border cooperation for stablecoin arrangements. The FSB’s 2025 thematic review indicates that implementation remains uneven, creating regulatory arbitrage opportunities. The UK should align tightly with these recommendations, and use its influence to promote international data and disclosure standards that make cross-border supervision practical. 9,10
48. From payments and central bank research: CPMI analysis stresses that stablecoins’ benefits for cross-border payments depend on the full arrangement and robust regulation; and BIS work on unified-ledger approaches (including Project Agorá) suggests that tokenised deposits and tokenised central bank money may become dominant in wholesale contexts. The UK should therefore design stablecoin rules that are interoperable with future tokenised deposit and central bank settlement experiments, rather than treating stablecoins as a separate ‘crypto silo’. 11,16,17
49. ‘What can stablecoins do that Revolut (or a modern fintech account) cannot?’ In oral evidence, a Member suggested that, as a retail customer, they could not see what stablecoins can do that a Revolut account cannot. The correct answer is that domestic retail payments in the UK are already efficient, so stablecoins should not be sold as a replacement for all existing retail payment experiences. Their differentiators are instead: (i) 24/7 programmable settlement (eg, escrow, conditional payments) that can execute within digital commerce and tokenised asset workflows, (ii) cross-border settlement with fewer intermediaries when both counterparties are in a stablecoin-enabled network, and (iii) portability across software systems (tokens can be integrated into third-party applications) subject to compliant wallet models. 2,11
50. ‘Amazon money’ and the ‘singleness of money’: oral evidence warned against closed ecosystems where an issuer or platform traps users through fees or lack of interoperability. This is a real risk if a dominant platform issues a proprietary stablecoin and restricts redemption or transfers. The policy response is straightforward: require (a) clear par redemption, (b) interoperability requirements for payment stablecoins used in the UK, and (c) separation of stablecoin issuance from anti-competitive wallet/platform tying. These are matters of competition and consumer protection as much as prudential design. 2,4
51. ‘Stablecoins as suitcases of cash’: oral evidence noted that stablecoins could be used as a modern analogue to cash for illicit transactions. Two realities can be true at once: stablecoins may be used for illicit transfers, but on-chain activity is often more traceable than cash, and large issuers and exchanges can freeze or block funds when alerted. The UK’s practical enforcement focus should therefore be on: regulated wallets for payments use; identity and screening at issuance/redemption; travel-rule compliant transfer information when regulated intermediaries are involved; and rapid freezing/seizure processes that preserve due process. 2,22,9
52. ‘Tokenised deposits can do everything stablecoins can do, but better’: Professor Wilmarth argued that tokenised deposits could replicate stablecoin functionality while remaining inside the banking perimeter. Tokenised deposits will likely be important—especially for wholesale settlement—but they are not a full substitute for stablecoins because: (i) they are bank liabilities and so access is mediated by bank participation and account rules, (ii) they do not automatically provide a neutral, software-native settlement asset usable by non-bank PSPs and global digital marketplaces, and (iii) they may not provide the same level of interoperability across open application ecosystems. The UK should therefore enable both, but require that any instrument used as ‘money for payments’ meets money-like safeguards (reserve quality, redemption, resilience, consumer protections). 3,16,4
53. ‘Immutability’ and consumer redress: Professor Wilmarth highlighted the difficulty of unwinding transactions on public permissionless chains. This is a strong argument for (a) mainstream payment stablecoins to operate with governance and wallet designs that enable error correction and fraud recovery, and (b) FCA rules to require clear liability assignment across the chain (issuer, wallet provider, and intermediaries). In practice, consumer protection for stablecoin payments should aim to match or exceed consumer outcomes in existing electronic money and card payment systems, even if the underlying settlement is tokenised. 3,6
54. The UK can lead by adopting an explicit ‘stablecoin as regulated settlement asset’ model: stablecoins used for payments should be regulated like money, with the regulatory intensity determined by scale and use-case (non-systemic vs systemic). This aligns with the Bank of England’s consultation approach and with international recommendations. 4,9
I.1 Design requirements for any UK payment stablecoin (minimum viable trust)
I.2 Additional requirements as a stablecoin approaches systemic scale
I.3 Phased rollout and metrics (how to scale without taking systemic bets early)
Jurisdiction | Legal perimeter for payment stablecoins | Issuer authorisation | Reserve / backing expectations (high level) | Wallet / custody expectations | Systemic / significant token oversight |
United Kingdom | HMT proposes new FSMA regulated activities for cryptoassets including stablecoin issuance; FCA consulting on ‘qualifying stablecoin’ issuance and custody; Bank of England regime for systemic DSAs once recognised by HMT. | FCA authorisation for issuing qualifying stablecoins; joint oversight when systemic. | Reserve quality, segregation, redemption rules (FCA); systemic regime proposes high-quality backing assets including central bank deposits and short-term gilts (BoE). | Safeguarding rules for qualifying cryptoassets including stablecoins; emphasis on custodial wallet standards (FCA). | HMT recognition triggers joint Bank/FCA oversight and Banking Act 2009 powers for systemic stablecoin issuers (BoE). |
United States | Federal framework for ‘payment stablecoins’ under GENIUS Act (Public Law 119‑27). | Permitted payment stablecoin issuers under federal/state arrangements as set out in the Act. | Public summaries emphasise 100% reserve backing with liquid assets and public reserve disclosures. | Act contemplates AML/sanctions obligations and consumer protections for payment stablecoins. | Systemic treatment depends on US supervisory architecture; Act establishes baseline perimeter for payment stablecoins. |
European Union | MiCA regime for cryptoassets including ARTs and EMTs; separate but related payments/e-money rules apply where relevant. | Issuer authorisation required; EBA role for significant ARTs/EMTs; ESMA oversight for markets and CASPs within MiCA scope. | High-level: reserve and governance requirements and redemption expectations for EMTs/ARTs, with significant-token enhancements. | Authorised issuers and supervised service providers; custody and disclosure standards embedded in MiCA framework and RTS/ITS. | ‘Significant’ tokens subject to enhanced oversight (EBA). |
Sources: UK: HM Treasury policy note; FCA CP25/14; Bank of England systemic stablecoin consultation. US: Public Law 119‑27 (GENIUS Act) and White House fact sheet. EU: ESMA MiCA page; EBA ART/EMT page.8,6,4,20,21,18,19
Risk category | What can go wrong | Controls that work | Primary UK levers (non-systemic vs systemic) |
Run / liquidity risk | Coinholders rush to redeem; reserves need to be liquid at scale; contagion to short-term markets. | High-quality liquid reserves; stress testing; redemption time limits; liquidity facilities only with safeguards. | FCA reserve & redemption rules; BoE systemic backing-asset and liquidity requirements. |
Operational resilience / cyber | Custody failures, hacks, key compromise; service outages; smart contract bugs. | Custody standards; security audits; incident reporting; segregation; recovery planning. | FCA custody/safeguarding rules; BoE systemic operational resilience expectations; cross-authority supervision. |
Consumer harm | Misleading ‘stable’ claims; depegs; poor disclosures; inability to recover from errors/fraud. | Clear disclosures; par redemption; complaint handling and redress; liability allocation; dispute mechanisms. | FCA conduct rules; joint regime for systemic; competition/interoperability rules to prevent lock-in. |
Financial crime / sanctions | Use for scams, laundering, sanctions evasion; ‘suitcases of cash’ concern. | KYC at wallets; screening at on/off ramps; travel-rule compliance; freezing/seizure processes. | FCA authorisation and AML requirements; cooperation arrangements for cross-border coins; issuer/wallet controls. |
Market integrity / competition | Walled-garden money; platform tying; opaque reserve reporting; conflicts of interest. | Interoperability; transparent reserve reporting; governance standards; competition enforcement. | FCA and (where systemic) BoE rules; competition objective; enforce separation of issuance and platform power. |
Sources: BIS evidence on stablecoin growth and interconnections; Bank of England systemic consultation; FCA CP25/14; FSB stablecoin recommendations; Committee oral evidence (selected concerns).12,4,6,9,2,3
Stablecoin arrangement: A system that issues a token intended to maintain a stable value, supported by governance, reserve assets and redemption/transfer mechanisms.
DSA (Digital settlement asset): A legal category in UK law intended to encompass digital forms of money used to settle payment obligations, including systemic stablecoins in scope of the Bank of England once recognised.
Qualifying stablecoin (UK): A category used in UK regulatory proposals and FCA consultation for stablecoins intended for certain regulated activities.
ART / EMT (EU MiCA): Asset-referenced token / E-money token categories under the EU’s Markets in Crypto-Assets Regulation.
Tokenised deposits: Bank deposits represented on a tokenised platform/ledger (still bank liabilities).
Unhosted wallet: A wallet where a user controls their private keys directly (no custodial intermediary).
Hosted / custodial wallet: A wallet service where an intermediary safeguards assets and provides user access (subject to regulation).
Definitions and framing sources: 9,4,6,18
1. House of Lords Financial Services Regulation Committee, "Call for Evidence: Inquiry into the growth and proposed regulation of stablecoins in the UK" (Committee document), deadline 11 March 2026. Provided to the author. Accessed 26 February 2026.
2. House of Lords Financial Services Regulation Committee, Oral evidence, 4 February 2026 (Evidence Session No. 1, uncorrected transcript; witness: Chris Giles). Provided to author. Accessed 26 February 2026.
3. House of Lords Financial Services Regulation Committee, Oral evidence, 4 February 2026 (Evidence Session No. 2, uncorrected transcript; witness: Professor Arthur E. Wilmarth Jr). Provided to author. Accessed 26 February 2026.
4. Bank of England, "Proposed regulatory regime for sterling-denominated systemic stablecoins" (consultation paper web publication), 10 November 2025. https://www.bankofengland.co.uk/paper/2025/cp/proposed-regulatory-regime-for-sterling-denominated-systemic-stablecoins (accessed 26 February 2026).
5. Bank of England, "Bank of England launches consultation on regulating systemic stablecoins" (news release), 10 November 2025. https://www.bankofengland.co.uk/news/2025/november/boe-launches-consultation-on-regulating-systemic-stablecoins (accessed 26 February 2026).
6. Financial Conduct Authority, CP25/14 "Stablecoin issuance and cryptoasset custody" (consultation paper PDF), first published 28 May 2025; last updated 6 February 2026. https://www.fca.org.uk/publication/consultation/cp25-14.pdf (accessed 26 February 2026).
7. Financial Conduct Authority, CP25/14 webpage (consultation dates and updates). https://www.fca.org.uk/publications/consultation-papers/cp25-14-stablecoin-issuance-cryptoasset-custody (accessed 26 February 2026).
8. HM Treasury, "Future financial services regulatory regime for cryptoassets: regulated activities" (policy note; Cryptoassets Order 2025 draft), 16 December 2025. https://www.gov.uk/government/publications/regulatory-regime-for-cryptoassets-regulated-activities-draft-si-and-policy-note/future-financial-services-regulatory-regime-for-cryptoassets-regulated-activities-policy-note-accessible (accessed 26 February 2026).
9. Financial Stability Board, "High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements" (final report), 17 July 2023. https://www.fsb.org/uploads/P170723-3.pdf (accessed 26 February 2026).
10. Financial Stability Board, "Thematic Review on FSB Global Regulatory Framework for Crypto-asset Activities" (peer review report), 16 October 2025. https://www.fsb.org/uploads/P161025-1.pdf (accessed 26 February 2026).
11. Bank for International Settlements, Committee on Payments and Market Infrastructures (CPMI), "Considerations for the use of stablecoin arrangements in cross-border payments" (report), October 2023. https://www.bis.org/cpmi/publ/d220.pdf (accessed 26 February 2026).
12. Bank for International Settlements, BIS Bulletin No 108, Aldasoro et al, "Stablecoin growth – policy challenges and approaches" (bulletin), 2025. https://www.bis.org/publ/bisbull108.pdf (accessed 26 February 2026).
13. Bank for International Settlements, BIS Papers No 141, Kosse et al, "Will the real stablecoin please stand up?" (paper), November 2023. https://www.bis.org/publ/bppdf/bispap141.pdf (accessed 26 February 2026).
14. International Monetary Fund and Financial Stability Board, "IMF-FSB Synthesis Paper: Policies for Crypto-Assets" (report), 7 September 2023. https://www.fsb.org/uploads/R070923-1.pdf (accessed 26 February 2026).
15. International Monetary Fund, Cerutti et al, "Understanding Stablecoins" (IMF Departmental Paper), 2025. https://www.imf.org/-/media/files/publications/dp/2025/english/usea.pdf (accessed 26 February 2026).
16. Bank for International Settlements Innovation Hub, "Project Agorá: exploring tokenisation of cross-border payments" (project page), updated 14 October 2025. https://www.bis.org/about/bisih/topics/fmis/agora.htm (accessed 26 February 2026).
17. Bank for International Settlements, press release "Next-generation monetary and financial system takes shape" (Project Agorá announcement), 24 June 2025. https://www.bis.org/press/p250624.htm (accessed 26 February 2026).
18. European Securities and Markets Authority, "Markets in Crypto-Assets Regulation (MiCA)" (overview page), updated 28 November 2025. https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica (accessed 26 February 2026).
19. European Banking Authority, "Asset-referenced and e-money tokens (MiCA)" (overview page). https://www.eba.europa.eu/regulation-and-policy/asset-referenced-and-e-money-tokens-mica (accessed 26 February 2026).
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