The United Kingdom Deepens Stablecoin Regulation: Between Innovation and Financial Prudence

The discussion on how the United Kingdom should regulate digital stable assets has taken on a critical dimension following the analysis conducted in the House of Lords, where experts presented polarized perspectives on the future of these digital currencies. The research has focused on evaluating whether stablecoins represent a genuine financial revolution or simply transitional mechanisms between the crypto universe and traditional money.

Stablecoins as Crypto Gateways: The Skeptical View

In the legislative debate, Chris Giles of the Financial Times expressed deep doubts about the widespread adoption of stablecoins denominated in pounds sterling within the UK. His analysis starts from a fundamental premise: these currencies lack a clear legal and regulatory basis that makes them safe for citizens. Giles argued that, although a solid regulatory framework could improve cross-border payment efficiency and reduce operational costs, in the domestic UK market, stablecoins face a formidable obstacle: the already established instant payment infrastructure in the UK.

The economist characterized these digital currencies as mere entry and exit points to crypto ecosystems, rejecting the narrative that they would revolutionize the financial system. In his assessment, stablecoins have limited utility within developed economies with efficient payment systems, though he acknowledged they could play a different role in emerging economies.

The Issue of Yields and the Nature of Money

A central aspect of Giles’s analysis was the question of whether stablecoins should generate interest for holders. He argued that this decision fundamentally determines the purpose of these assets. If they function solely as payment technology, there is no economic justification for offering yields, since productive checking accounts have never dominated Western financial systems.

Giles expressed approval of the Bank of England’s approach, which proposes regulating these currencies with the same standards applied to traditional money, including rigorous backing requirements and liquidity safety nets. However, he warned about potential illicit uses, emphasizing the need for international regulatory coordination and stricter controls on customer identification procedures and anti-money laundering measures.

The Debate on Regulatory Arbitrage: Criticisms of the GENIUS Act

From a diametrically opposed perspective, Arthur E. Wilmarth Jr., an American law professor, severely questioned the U.S. GENIUS Act, describing it as a problematic decision that allows non-bank institutions to issue dollar-denominated stablecoins. Wilmarth warned that this permissiveness represents a form of regulatory arbitrage, enabling under-regulated companies to enter the money business, undermining centuries of prudential banking frameworks.

The scholar proposed as a superior alternative the tokenization of traditional bank deposits, considering that this route would better preserve financial system stability. Although he acknowledged that British regulators are building a more robust regime than the U.S., he maintained his criticism of American regulatory decisions.

Implications for the United Kingdom

The divergent positions presented in the House of Lords reflect a global tension: balancing financial innovation with the protection of systemic stability. For the UK, this deliberation is particularly relevant given its role as an international financial center and its need to establish standards that other countries may emulate or challenge in the coming years.