The United Kingdom should press ahead with a stablecoin regulatory regime, but the rules must avoid choking the commercial viability of a pound-denominated market. That is the central message of a new report from the House of Lords’ Financial Services Regulation Committee, issued this week. The cross‑party panel argues the UK is “lagging behind” the United States and the European Union as the gap in clarity around stablecoins persists, slowing development and investment in the UK despite the global footprint of USD-pegged tokens like USDt and USDC.

While the committee endorses much of the Bank of England’s and the Financial Conduct Authority’s proposed framework, it warns several features could undermine the competitiveness and robustness of UK-issued stablecoins. In particular, the report backs a 1:1 backing requirement for fiat-referenced stablecoins and a Bank of England backstop lending facility for systemic issuers. But it cautions that some BoE proposals announced in November 2025 could be counterproductive in practice, and could push stablecoins away from the UK market if too onerous.

Key takeaways

• The UK should regulate stablecoins with a clear regime, but calibrate rules to preserve commercial viability and competitiveness, avoiding a framework that makes GBP stablecoins unworkable.
• A 1:1 reserve backing standard is supported for fiat-backed stablecoins, alongside a BoE backstop for systemic issuers; however, the emphasised reserve mix and related constraints require careful design to avoid harming issuers’ viability.
• Proposals to hold a substantial share of backing assets in unremunerated central-bank deposits—around 40%—drew criticism and could threaten the UK’s competitive position if implemented as drafted.
• Temporary holding limits for entities and individuals, and a ban on remuneration to coinholders, are highlighted as potentially inhibiting growth and practicality, depending on how they’re implemented.
• The regime’s stance on returns—mirroring MiCA and the GENIUS Act—could affect how UK-issued stablecoins attract users, with ongoing questions about allowable non‑interest incentives and rewards.

UK regulatory trajectory: balancing oversight with market growth

The Lords committee frames stablecoins as a strategic opportunity for the UK’s payments infrastructure, not merely a question of policing risks. It notes that the current lack of a clear regime has “suppressed stablecoin development and investment in the UK,” even as institutions and consumers increasingly rely on global USD-pegged tokens. The report aligns with the Bank of England’s broader aim to mitigate financial stability risks while enabling the UK to participate in a fast-evolving payments landscape.

Crucially, the committee urges the Treasury, the BoE, and the FCA to maintain the present timelines and to provide a practical blueprint for how dual regulation will work in practice for systemic issuers. In doing so, it signals a willingness to move forward, but only if the resulting regime remains attractive to issuers and users and does not tilt the economics so heavily in favor of incumbents or foreign markets. This stance reflects a broader market dynamic: as other jurisdictions move ahead with clear rules, the UK risks losing ground if its framework becomes a barrier rather than a facilitator of innovation.

Reserves, backstops, and the practicalities of holding limits

At the heart of the debate is a design question: how should a stablecoin reserve be constituted and protected? The committee backs a 1:1 backing standard for fiat-backed stablecoins, intended to provide trust and reduce liquidity risk. It also endorses a BoE backstop lending facility to support systemic issuers in times of stress, a feature that could reassure large users and custodians about safety margins.

However, the report singles out the BoE’s proposal for requiring a substantial portion of backing assets to be held as unremunerated central-bank deposits—specifically, a 40% threshold. This element has drawn “considerable criticism” and, the committee warns, could weigh on the viability of issuers and the UK’s international competitiveness. In practice, holding a large share of reserves in non‑yielding central-bank deposits could erode issuer incentives and raise funding costs, potentially deterring issuers from choosing the UK as their base of operations.

The committee also flags potential complications from temporary holding limits that would apply to both businesses and individuals. While designed to curb risk, such limits could complicate operations and drive users toward more permissive offshore jurisdictions if not implemented with workable exemptions and robust operational frameworks. The balance, the report argues, is to prevent abuse without constraining legitimate, low-cost payments that stablecoins can provide.

Remuneration bans and what counts as a reward

Another edge of the regulatory blade concerns rewards and interest payments on stablecoin holdings. The BoE’s draft regime contemplates banning remuneration for coinholders of sterling-denominated systemic stablecoins, aligning with the EU’s MiCA framework and echoing the U.S. GENIUS Act’s stance on non-bank issuers. The aim is to limit the risk that stablecoins become investment vehicles or sources of yield rather than straightforward payment rails.

Yet the committee notes a practical tension: many users expect some form of incentive or reward for holding a stablecoin, a feature that can be crucial for adoption, especially for merchants and on-chain payments. The report raises questions about whether card-style rewards or other non-interest incentives could be permissible under the final regime. If types of non-interest rewards are allowed, they could preserve user appeal while maintaining the core risk controls; if not, there is a risk of dampening demand and slowing the growth of UK-issued tokens.

The discussion also touches on broader policy decisions: how to balance the regulatory emphasis on safety and anti‑illicit-finance measures with the need to foster a competitive, user-friendly payments ecosystem. The committee emphasizes that stablecoins should facilitate fast, low-cost transactions, not simply serve as fixed-value assets. The challenge, then, is to craft rules that preserve consumer protection and systemic integrity without turning the GBP stablecoin market into a constrained or unattractive option.

Evidence, risk, and a strategic choice for the UK

Throughout its inquiry, the Lords committee heard a spectrum of views—from industry participants to academics—about whether stablecoins can extend beyond on/off‑ramp use and into everyday payments, while maintaining financial stability, bank funding access, and consumer protections. The resulting framework, the report argues, should nurture growth in a pound-denominated stablecoin sector rather than regulate it out of relevance. That means clarifying how dual regulation will operate in practice, ensuring reserve requirements are workable, and calibrating measures like holding limits to avoid unnecessary friction in the payments system.

In essence, the committee acknowledges the high-stakes nature of the UK’s regulatory choice. A well-calibrated regime could position the UK as a globally relevant hub for GBP-denominated stablecoins, supporting faster, cheaper payments for individuals and businesses alike. Misjudgments, however, could push issuers overseas or delay the development of a domestic stablecoin market that many see as a natural extension of the country’s sophisticated financial services sector.

To the fore of the debate is a practical question: can the UK design a regime that is both credible to investors and appealing to issuers, while meeting stringent standards for risk management and consumer protection? The committee’s answer is cautiously optimistic, but contingent on a careful balancing act that preserves incentives for innovation while preventing misuse and systemic risk. The timelines referenced in the BoE consultation and the ongoing FCA guidance process will be telling, as regulators seek to align domestic rules with international norms without creating a regulatory dead zone for UK firms.

As policymakers proceed, readers should watch how the Treasury, the Bank of England, and the FCA translate these recommendations into concrete policy—particularly around the 40% reserve rule, the viability of a BoE backstop, and the scope of permissible non-interest incentives. The outcome will shape whether the United Kingdom becomes a leading jurisdiction for GBP stablecoins or remains a distant second to more clearly defined regimes elsewhere.

What comes next is a pragmatic test: can the UK harmonize safety, clarity, and competitiveness in a way that supports real‑world, low-cost payments while maintaining high standards for consumer protection and financial stability? The next few months should reveal whether the regime evolves into a practical blueprint that inspires confidence from issuers, users, and financial partners alike.

Galaxy Digital has launched an institutional over-the-counter prediction-markets desk, opening the service with a $10 million event swap tied to the Digital Asset Market Clarity Act.

Galaxy said Tuesday that the desk operates within its Global Markets unit and serves institutional clients seeking exposure to non-sports event contracts on Kalshi and Polymarket without relying solely on public order books. The Nasdaq-listed digital assets firm said it will act as a principal counterparty, allowing it to quote large bilateral trades and hold the risk on its own book.

The first transaction involved crypto hedge fund Arca, which used the structure to take a position on whether the CLARITY Act passes before 2027. Under the event swap, Arca pays Galaxy Digital if the bill becomes law before that deadline, while Galaxy pays Arca if it does not.

Galaxy Digital targets block-size prediction market trades

According to Galaxy, the new desk is designed for trade sizes that current prediction-market order books cannot easily absorb. The firm said it can also pair event positions with hedges in equities and commodities, giving institutional clients a way to structure trades around political, regulatory, and macro events.

Prediction markets have cleared more than $60 billion in volume in 2026, according to Galaxy’s release. However, the firm said liquidity remains limited for larger tickets, where a $10 million order could affect pricing before execution is complete.

Jeff Dorman, Arca’s chief investment officer, said in the release that prediction markets currently offer one of the most suitable ways to hedge against CLARITY. He added that the market does not yet have enough institutional liquidity for a fund of Arca’s size.

CLARITY Act trade opens the desk

The inaugural swap is linked to Kalshi’s binary market on the Digital Asset Market Clarity Act, where “yes” shares trade between $0 and $1 based on the market’s implied probability of passage. Galaxy said the Senate Banking Committee advanced the bill in a 15-9 vote on May 14, moving it closer to a possible floor vote.

Galaxy’s research desk currently assigns a 75% probability to the bill’s passage and estimates a signing date during the week of August 3. The firm said Kalshi and Polymarket traders have priced the same outcome between 50% and 73% over the past month.

Jason Urban, Galaxy’s global co-head of digital assets, said event-driven markets are becoming important tools for sophisticated investors expressing macro views. He said Galaxy Digital is offering clients a principal counterparty that can warehouse risk and execute at a meaningful size.

The move places Galaxy alongside other trading firms entering prediction markets this year. Jump Trading and Wintermute began formal activity in the sector earlier, with Wintermute streaming two-sided quotes last month.

Galaxy’s role differs from a market maker focused on tighter spreads. The firm said its desk is built to absorb block trades that are too large for on-exchange books.

Institutional interest builds around Kalshi and Polymarket

Kalshi and Polymarket have reported a rapid rise in activity. Combined monthly turnover on the two platforms grew from under $5 billion in September 2025 to about $24 billion in April, according to figures cited in Galaxy’s release.

Kalshi said last month that its annualized institutional volume rose 800% over six months to $178 billion, as it announced a $1 billion raise at a $22 billion valuation. Intercontinental Exchange, the parent company of the New York Stock Exchange, is also backing Polymarket with $2 billion in funding.

TLDR:

• Four 2025 hardforks cut BSC block times from 3 seconds to 0.45s with zero downtime.
• The Q1 2026 quarterly burn removed over 1.57 million BNB, valued at more than $1 billion.
• Ondo Global Markets launched 260+ tokenized stocks and ETFs natively on BNB Chain in 2025.
• BSC-native stablecoin $U reached $1 billion in supply within weeks of its December 2025 launch.

BNB Smart Chain has grown into one of crypto’s most active and technically advanced Layer 1 networks. Since its 2020 launch, the chain has delivered consistent protocol upgrades, ultra-low fees, and a maturing ecosystem.

With deflationary tokenomics, expanding stablecoin supply, and real-world asset integration, BNB Smart Chain continues to attract users and developers at scale in 2026.

Four Hardforks Drive Speed and Fee Reductions

BNB Smart Chain completed four major protocol upgrades in 2025, each targeting speed and cost. The Pascal, Lorentz, Maxwell, and Fermi hardforks ran without a single instance of network downtime.

Together, they reduced block times from three seconds down to just 0.45 seconds. Finality dropped from 7.5 seconds to 1.1 seconds, a dramatic shift for user experience.

Gas throughput doubled to 133 million gas per second following the upgrades. Validators also slashed the minimum gas price from 1 Gwei to 0.05 Gwei during this period.

As BNB Chain confirmed on X, median fees fell well below $0.01 per transaction. Cheaper and faster transactions directly translated into record network activity.

Daily transactions peaked at 31 million in 2025, an all-time high for the chain. The fee reductions made BNB Smart Chain highly competitive against other EVM-compatible networks.

Lower barriers to entry also opened the chain to users in emerging markets. Peer-to-peer stablecoin transfers, in particular, saw strong growth during this period.

The protocol upgrades also strengthened BNB’s deflationary mechanics. BEP-95, launched in October 2021, burns roughly 10% of every gas fee in real time.

Higher transaction volumes mean more BNB removed from circulation permanently. The 35th quarterly burn in Q1 2026 alone eliminated over 1.57 million BNB, valued at more than $1 billion.

RWAs and Stablecoins Expand the Ecosystem

Real-world assets have found a natural home on BNB Smart Chain. Ondo Global Markets launched on the chain in October 2025, introducing over 260 tokenized stocks and ETFs.

Assets include well-known names such as SPY, NVDA, and TSLA. The tokens are fully backed by underlying securities and support 24/7 trading with dividend tracking.

Ondo Finance confirmed in March 2026 that over 60 additional tokenized stocks and ETFs went live on BNB Chain. New additions included assets tied to AI, defense, and energy sectors.

This expansion pushed Ondo past $1 billion in total value locked across all chains. Tokenized commodities like PAXG and XAUT also provide gold-backed exposure on-chain.

On the stablecoin front, USDT leads supply on the chain by a wide margin. USD1 has risen to second place and continues gaining ground quickly.

United Stables launched its BSC-native stablecoin $U in December 2025, backed by USDT, USDC, and USD1. The token reached $1 billion in on-chain supply and features gasless transfers via EIP-3009.

DeFi protocols round out the ecosystem with strong volumes and liquidity. Uniswap now leads trading volumes on BNB Smart Chain following its multi-chain deployment.

Venus provides over $1.6 billion in lending liquidity, while ListaDAO handles liquid staking. PancakeSwap, GMGN.AI, and memecoin launchpads like Four.meme keep retail activity high across the chain.

The United Kingdom should advance its stablecoin regulatory regime, but with calibrations to avoid making a pound-denominated market commercially unworkable, a House of Lords committee concluded in a published report. The cross-party Financial Services Regulation Committee argued that the UK currently lags behind the United States and the European Union, and that the absence of a clear regime has constrained development and investment in the UK stablecoin sector, even as dollar-pegged tokens such as USDt and USDC continue to expand globally. According to Cointelegraph, the committee’s findings endorse much of the Bank of England’s and the Financial Conduct Authority’s proposed framework while cautioning against provisions that could hamper the viability or competitiveness of UK-issued stablecoins.

The report supports a 1:1 reserve backing standard for fiat-referenced stablecoins and backs a Bank of England backstop lending facility for systemic issuers. Yet it flags several elements from the BoE’s November 2025 consultation as potentially damaging. In particular, the committee criticizes the proposal that systemic issuers hold at least 40% of their backing assets in unremunerated central bank deposits, describing the requirement as having attracted significant criticism and potentially undermining the viability of issuers or the UK’s international competitiveness. It also notes that proposed temporary holding limits for businesses and individuals could impede growth in GBP-denominated stablecoins and may be impractical to implement.

Key takeaways

– 1:1 reserve backing and BoE backstop: The committee endorses the principle that fiat-collateralized stablecoins should be backed by high-quality assets at a 1:1 ratio and supports a BoE backstop facility for systemic issuers.

– Criticism of reserve-dust policies: The proposal to require a substantial share of reserves in unremunerated central bank deposits drew sharp critique and is seen as potentially detrimental to issuer viability and UK market competitiveness.

– Holding limits are problematic: Temporary limits on holdings by entities and individuals are viewed as potentially stifling and not readily implementable.

– Remuneration bans and MiCA alignment: The committee notes the intention to prohibit interest payments on sterling-systemic stablecoins, aligning with MiCA’s approach in the European Union and parallel discussions in the United States, though the policy landscape remains unsettled.

– Aim to nurture, not merely police: The Lords advocate a framework that grows a robust pound-denominated stablecoin sector while managing illicit-finance and financial-stability risks, clarifying how dual regulation of systemic issuers would operate in practice.

Regulatory alignment and systemic stablecoins

The committee’s analysis centers on aligning the UK regime with broader regulatory objectives—financial stability, consumer protection, and the integrity of the payments landscape—while safeguarding the UK’s competitiveness as a financial hub. The report favors the core Bank of England/FCA framework that treats systemic stablecoin issuers similarly to other systemically important financial entities, with appropriate oversight and backstops to mitigate failure risk. However, it argues for recalibrations to avoid suppressing the growth of sterling-backed tokens that could compete as a payment instrument in the domestic market.

A notable tension emerges around the BoE consultation’s reserve requirements and asset mix. The 40% threshold for unremunerated central bank deposits is singled out for concern, with the committee noting that such a rule could hamper issuer resilience and raise cross-border cost of capital for UK platforms. The debate mirrors wider policy tensions in stablecoin regulation: safety versus market functioning, and the risk of shifting activity to less-regulated jurisdictions if capital costs in London are too high.

In urging timely progress, the Lords emphasize the need for a clear regulatory timetable and for detailing how dual regulation would function in practice for systemic issuers. The committee underscores that the UK should calibrate reserve standards and liquidity rules so that sterling stablecoins can compete with traditional payment rails, rather than being regulated out of relevance. This viewpoint aligns with a broader policy objective: to anchor innovation within a robust regulatory perimeter that supports safe, efficient payments while minimizing systemic risk.

Remuneration restrictions, incentives, and policy coherence

A central policy question concerns whether stablecoin holders may receive rewards or interest on holdings. The BoE’s draft regime contemplates banning remuneration for holders of sterling-denominated systemic stablecoins, a stance consistent with the EU’s Markets in Crypto-Assets Regulation (MiCA) and with ongoing debates in the United States, including aspects of the GENIUS Act. The committee’s position highlights the practical implications of such a ban: while it reinforces a focus on payments use cases—fast, low-cost transfers—without converting stablecoins into yield instruments, it also raises concerns about the sustainability and business model of UK issuers.

The tension becomes more acute when considering potential non-interest incentives, such as card-style rewards or other non-financial benefits. The committee warns that uncertainty about what will be permitted could affect product design, issuer capital planning, and consumer expectations. The overarching question is whether the regulatory framework can encourage the development of resilient, consumer-friendly GBP stablecoins that can be integrated with existing banking and payments infrastructure, while preventing yield-driven incentives that could blur the line between money and investment.

Inquiry evidence and strategic choices

The Lords’ conclusions reflect months of evidence from industry participants and academics. In its proceedings, the committee pressed witnesses on whether stablecoins can extend beyond simple “on and off-ramps into crypto” and whether the UK can manage associated financial-stability and bank-funding risks. Witnesses offered divergent views on the GENIUS Act’s approach to non-bank issuers, reflecting broader policy debates in the United States. Across the spectrum, the committee stressed that stablecoins should not create new channels for illicit activity and that the regulatory framework should be robust and enforceable.

Beyond enforcement, experts emphasized the need to balance regulation with market development. The Lords argue for a UK strategy that nurtures and harnesses stablecoin technology as a payment mechanism, rather than treating it as a peripheral or purely speculative asset class. This approach presumes a stable, predictable regulatory environment that reduces uncertainty for issuers, banks, and payment providers while maintaining appropriate risk controls.

Implications for market structure, licensing, and cross-border considerations

For market participants, the Committee’s recommendations signal a push toward a structured, rules-based GBP stablecoin ecosystem anchored by a clear regulatory backstop and rigorous reserve standards. This has several practical implications:

– Licensing and oversight: Issuers of systemic GBP stablecoins could face licensing requirements, governance standards, and ongoing supervisory actions designed to ensure resilience, liquidity, and consumer protection.

– Banking integration and liquidity: A regulated stablecoin market, with calibrated reserve requirements and a credible backstop, could facilitate integration with UK banks and the broader payments rails, potentially improving settlement efficiency and reducing settlement risk.

– Cross-border considerations: The UK’s approach would need to align with international standards and vary with other major jurisdictions’ regimes. The committee’s emphasis on practical viability suggests a preference for harmonized, but not burdened, cross-border operations that support legitimate use cases while limiting regulatory arbitrage.

– Compliance and risk management: Financial institutions, exchanges, and issuers would be expected to implement robust AML/KYC controls and risk-management practices commensurate with the systemic nature of the instruments, consistent with ongoing UK enforcement priorities.

Closing perspective

The House of Lords committee presents a principled call for a measured, ambitious approach to stablecoins that supports innovation and efficiency in the UK payments landscape while maintaining robust protections. The report argues for sustaining timelines, clarifying dual-regulatory arrangements for systemic issuers, and recalibrating specific requirements to avoid stifling growth. As policymakers, regulators, and market participants translate these recommendations into policy design, the key question will be whether the UK can establish a stable, compliant pound-stablecoin market that competes effectively with global standards without compromising financial stability or regulatory integrity. The coming months will reveal how Treasury, the Bank of England, and the Financial Conduct Authority operationalize these positions and navigate the balance between risk management and market development. What remains unresolved is how allowances for non-interest incentives and evolving cross-border regimes will shape issuer strategies and the broader trajectory of the UK stablecoin ecosystem.