The United Kingdom House of Lords Committee on stablecoins held its first hearing last week, receiving largely unfavorable feedback on topics such as safety, regulation, and whether stablecoins are the future of money.
Meanwhile, flying the flag for a more positive take on stablecoins, advocacy group Stand With Crypto UK took the opportunity to announce that it has passed 250,000 advocates, and its petition for a pro-innovation strategy for blockchain and stablecoins is nearing the 100,000-signature threshold needed for it to be debated in parliament.
A rough hearing for stablecoins
Last week, the House of Lords Financial Services Regulation Committee, as part of its new inquiry on the growth and proposed regulation of stablecoins in the U.K., heard evidence from two expert witnesses: Chris Giles, economics commentator at the Financial Times, and Professor Arthur Wilmarth, Jr., Professor Emeritus of Law at George Washington University Law School.
Topics under discussion included stablecoins’ competition with banks, cross‑border use, illicit finance risks, and their treatment under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the stablecoin legislation that was signed into law by President Donald Trump in July.
On the latter subject, professor Wilmarth said he believed the passage the GENIUS Act was a “terrible” and “disastrous” mistake, as it allowed non-banks to issue stablecoins.
This, he argued, amounted to a form of “regulatory arbitrage” that allowed less regulated firms to enter into “the money business” and, in the process, undermine a prudential framework that has been built up “over centuries within the banking system.”
“I feel very strongly that a payment device like a stablecoin should only be offered by a fully regulated bank,” said Wilmarth.
He went as far as to suggest that he had a “hard time agreeing with anything in the bill,” but that the Bank of England (BoE) was proposing a more robust regime.
The passage of the GENIUS Act was met with broad approval from the digital asset industry in the U.S. for providing greater clarity and support for the sector. However, toward the end of last year, there was pushback from U.S. banking organizations requesting that it be more explicitly interpreted as banning all products offering yield from stablecoins.
Outside of banking concerns, Wilmarth had some strong words for stablecoins as a whole, telling the Committee that “I do not see [stablecoins] as a natural component of the financial system. To me, anything that stablecoins can do, tokenised deposits can do better.”
This withering assessment of stablecoins was shared by fellow witness Giles, the FT’s economic commentator, who went even further. He argued that stablecoins were “not massively interesting or going to take over the world” because they only have value as an “on- and off- ramps” to crypto, which he described as an “intrinsically worthless asset.”
Giles said that stablecoins had yet to capture any real momentum in the U.K. because of a lack of “clear legal underpinning and clear regulation,” making it risky to hold them as money.
He also noted that the main selling point of stablecoins is as a “more efficient, cheaper, potentially faster” form of payment than current money. However, when discussing sterling-denominated stablecoins, he doubted whether they could meaningfully displace the role of banks in the U.K. financial system, given that banks already offer low-cost and instant money transfers.
Another problem Giles highlighted was the utility of stablecoins to criminals, characterizing them as “new suitcases of cash.” In this respect, he advocated for more stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.
Among his various critiques, Giles did give some words for stablecoin advocates to cling onto, stating that concerns about yield-bearing stablecoins disrupting the broader economy were overblown, pointing to the fact that interest-bearing current accounts already exist and haven’t “taken over the whole of our financial system.”
Despite the hearing being tough viewing for stablecoin advocates, and a rough start to the House of Lords inquest for the soon-to-be-regulated asset class, there is still substantial support in the U.K. for stablecoin-nurturing regulation.
This was a point made by advocacy group Stand With Crypto UK in response to the hearing.
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Support grows and petition nears debate threshold
Meanwhile, Stand With Crypto UK, a grassroots advocacy network that encourages engagement with policymakers on digital assets and blockchain, announced that it had reached new landmarks of over 250,000 registered advocates and 70,000 signatures on its petition for the government to set out a pro-innovation strategy for blockchain and stablecoins.
“Stablecoins didn’t end up on the parliamentary agenda by chance – they’re there because hundreds of thousands of people are paying attention, organising, and refusing to let the U.K. drift behind as other countries move ahead,” said Adriana Ennab, director of Stand With Crypto UK.
She added that the petition on the government website, which is now just under 30,000 signatures away from the 10,000-signature threshold it must reach to be debated in parliament, represents “a real opportunity for citizens to shape the U.K.’s long-term approach to digital assets.”
The advocacy group’s stated mission is ensuring that the U.K. remains competitive in the global digital economy “through informed, balanced regulation that supports innovation, safeguards consumers, and preserves the U.K.’s position as a leading financial hub.”
In this respect, it urged any more supporters of “responsible innovation” to add their names to the stablecoin petition by the March 3 deadline.
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Source: https://coingeek.com/uk-lords-committee-on-stablecoin-hears-skepticism-in-first-session/
