My Lords, in light of the Lord Speaker’s Statement, let me be the first to thank him for his outstanding service. I look forward to the following months of working with him. I beg leave to ask the Question standing in my name on the Order Paper and I refer to my registered interests as a NED for the ALICE Group and co-chair of the Digital Markets and Digital Money APPG.
My Lords, stablecoins stand to play an important role in driving innovation in digital assets. It is important for the UK to position itself as a competitive global destination for digital assets, including stablecoins, while also addressing relevant consumer protection and financial stability risks. The Bank of England is engaging closely with the digital assets sector on its proposals for the regulation of systemic retail stablecoin.
I thank the Minister for that response, but I want to press him a little. Stablecoins and their usage are growing across the world. At the beginning of this year, $200 billion-worth had been issued—by September this year, it was $280 billion—pushed by the emergence of the GENIUS Act in the US and MiCA in Europe. These regulatory frameworks have enabled corporates to take advantage of being able to move money with agility and confidence, and real-time liquidity. How are we looking to keep up with the pace of the rest of the world as the use of stablecoins looks to reach $1.9 trillion by 2030, providing a distinct competitive advantage to businesses and industry in other geographies?
I am grateful to the noble Lord for his question. Before I answer him directly, perhaps I may also pay tribute to the Lord Speaker. He has been a friend to me since I first joined this House when he was an MP. I pay tribute to his outstanding service as Speaker of this House.
The noble Lord is correct to say that stablecoins have huge potential to play a significant role in both retail and wholesale payments. We are already seeing the benefits that stablecoin can provide in cross-border payments; for example, by reducing costs and improving efficiencies. He is absolutely right that it is important for the UK to harness these opportunities for the ongoing competitiveness of the UK financial services sector.
However, I do not think it is fair to say that the US is going any faster than the UK. Reading media coverage, we may conclude that, but the reality is that the US passed legislation for the regulation of stablecoin in the summer. US regulators will publish their regulatory rules in mid-2026, with a backstop date of January 2027 for the US regime to go live. In the UK, the Government published draft legislation in April, with final legislation due before the end of the year. Alongside this, the FCA is at an advanced stage in its consultation on the details of its regime, with a view to finalising its detailed rules and requirements in 2026. This will allow firms to be authorised and running in the UK regime by 2027.
My Lords, let me join in paying tribute to the Lord Speaker. I do not know whether to congratulate him, or say it is with great regret that he is in a situation in which he needs to stand down. We have all appreciated his service so much. A great deal more will be said on future occasions.
Stablecoin is not just an issue of digital payments and the efficiency of the pipeline, although you might think that from listening to the conversation. The move towards a global rollout of dollar and renminbi stablecoins has huge implications for monetary sovereignty. A sterling stablecoin has implications for the gilt markets and, hence, the public finances. Does the Minister begin to understand my concern that neither the Government nor the regulators have a grip on this and are considering the issues only narrowly—frankly, at a snail’s pace; I am astonished at the comments that he made just now—which means that we risk acting too late to protect our own national interest?
I do not accept what the noble Baroness says. There are, of course, financial stability and other considerations associated with stablecoin, but these need to be balanced against supporting innovation and ensuring the UK positions itself as a competitive global destination for digital assets. As I set out in my Answer to the original Question, I do not accept that the UK is in any way moving too slowly. The Government will bring forward final legislation to create a financial services regulatory regime for crypto assets this year, which will include issuing qualifying stablecoin in the UK. This will provide crypto asset firms the regulatory certainty needed to invest and help drive innovation in our financial services sector, and at the same time ensure that customers are protected from the worst harms when they make use of crypto asset services.
My Lords, digital assets cover a multitude of products and being the first mover is not always the advantage that some claim. UK politicians and regulators seem to speak with very different levels of enthusiasm about digital assets as a whole, including stablecoins. Who is going to prevail?
The UK Government recognise that facilitating stablecoin innovation is important for UK competitiveness. The Bank of England is the independent regulator for systemic stablecoin and can design its regime as necessary to manage the associated risks. However, it is a matter for the Government to decide whether to recognise firms as systemic and then bring them into the Bank’s regulation. The Treasury and Bank of England maintain a close and ongoing dialogue on the legal and regulatory treatment of stablecoins, in support of the Government’s objective to make the UK a global destination for digital assets.
My Lords, in the interests of pushing back the frontiers of ignorance, can the Minister explain, in simple words for the benefit of the House, what stablecoin actually is and whether I can receive my old age pension in it—which I am due to start getting from today?
I wish my noble friend a very happy birthday— his question allows me to give him a good present. It is fair to say that, right now, he cannot receive his state pension in stablecoin, but the fact that there is potential for that to evolve highlights the importance of the issues raised in this Question and of having exactly the right regulatory regime going forward.
My Lords, I also want to thank the Lord Speaker for all he has done for this House.
Although popular with some young people and tech entrepreneurs, most of us have little idea of what cryptocurrencies entail, their benefits or disadvantages—despite this week’s speech by Sarah Breeden, the Bank of England Deputy Governor. To return to my recent theme of financial education, will the Government take steps—perhaps by issuing a discussion paper—to ensure that all of us, from schoolchildren to pensioners such as the noble Lord, Lord Brennan, are better informed about them?
There is definitely something worth considering in that. I have learnt a lot in preparation for this Question. I know very little about the subject, but much more than I did when I started. The noble Baroness raises an important question, in terms not only of financial education—obviously we should look at what she proposes—but of keeping consumers safe. The FCA financial promotion rules require promotions to be clear, fair and not misleading, with risk warnings displayed prominently, especially for high-risk investments. Firms must ensure promotions accurately reflect benefits and risks and consider the target audience, to help consumers make well-informed decisions. The FCA has also been cracking down on unlawful financial promotions by influencers as part of the regulatory regime being developed. The Treasury is working closely with the FCA to set conduct standards for firms.
My Lords, first, I thank the Lord Speaker for all his service—a good fellow Scotsman and football fan. I also ask the House to note my interest as chairman of S&P Global. Does the Minister agree that stablecoin is like most other financial instruments: it depends on what is backing it and what is behind it? The important thing is not pace but the right regulation that creates the right environment for the UK to succeed and that ensures that people are protected by making sure that the assets that back stablecoin are there, available, and understood by consumers and businesses that use it.
I agree with every word that the noble Lord said. Absolutely, getting the regulatory regime right for this is important. As I said, we will bring forward that legislation by the end of the year.
My Lords, I declare my interest as co-chair of the All-Party Parliamentary Group on Crypto and Digital Assets. Does not the Bank of England’s announcement that it plans to regulate how much stablecoin an individual can hold—I say for the benefit of the noble Lord, Lord Brennan, that a stablecoin is simply a digital currency linked to a fiat currency—send a terrible signal to people who want to base their crypto businesses in the UK? Will he ask the Bank of England to publish its modelling? Its reasoning is based on the idea that unlimited holdings of stablecoins might lead to a run on bank deposits.