GW Law Faculty Publications & Other Works

Document Type

Article

Publication Date

2026

Status

Working

Abstract

This written testimony was submitted to the Financial Services Regulation Committee of the United Kingdom House of Lords, in response to that Committee’s “Call for evidence” on the “Growth and proposed regulation of stablecoins in the UK,” https://committees.parliament.uk/call-for-evidence/3845/. This testimony provides an overview of the global stablecoin market and the current leading uses of stablecoins. The testimony also describes the unacceptable dangers that uninsured nonbank stablecoins pose to financial stability, economic welfare, consumer protection, monetary policy, regulatory compliance, and law enforcement. The testimony presents the following policy recommendations:

(1) Stablecoins should be regulated in the same way as bank deposits. Only regulated banks should be allowed to issue or distribute stablecoins. Stablecoins should be required to satisfy the same prudential standards and provide the same consumer safeguards – including deposit insurance – as bank deposits.

(2) Stablecoins should be issued and recorded exclusively on permissioned distributed ledgers that are controlled and administered by one or more designated banks. The designated banks should have full responsibility and accountability for ensuring that their stablecoins and their distributed ledgers fulfill all legal and contractual obligations.

(3) To ensure compliance with AML/BSA/KYC requirements, stablecoin holders should be prohibited from holding their stablecoins in “unhosted” private digital wallets.

(4) Stablecoin reserves should be invested solely in central bank reserves or in government securities with a weighted average maturity of 20 days or less.

(5) If – contrary to the foregoing recommendations – nonbanks are allowed to issue stablecoins, those issuers, crypto exchanges, other crypto trading platforms, and their affiliates and business partners should be prohibited from paying interest, rewards, or any other financial inducements to stablecoin holders for owning stablecoins or keeping their stablecoins at designated locations.

The author also presented oral testimony (via Zoom) to the Committee, available at https://committees.parliament.uk/event/26299/formal-meeting-oral-evidence-session/.

GW Paper Series

2026-25

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