The UK House of Lords questioned Coinbase‘s top international policy executive on Wednesday over whether stablecoins pose a systemic threat to the British financial system, pressing him on deposit outflows, illicit finance, and the risk of bank runs similar to the collapse of Silicon Valley Bank.
Tom Duff Gordon, Coinbase’s vice president for international policy, told the Lords’ stablecoins inquiry that fully reserved, regulated stablecoins were “safer than uninsured bank deposits” because they are backed one-to-one by cash and high-quality government securities and can be redeemed at par. He argued the technology could reduce payment costs, accelerate cross-border transactions, and support emerging artificial intelligence-driven payment flows.
Lords Push Hard on Risk and Crime
Committee members repeatedly challenged Duff Gordon on who bears redemption risk during a crisis, and whether existing arrangements simply move that risk from banks to non-bank issuers rather than eliminating it. They also asked whether allowing rewards on stablecoins would trigger a deposit drain from UK banks.
Duff Gordon dismissed fears about disintermediation and credit creation as “wildly exaggerated,” noting that major corporations and card networks already use stablecoins to reduce payment costs.
On crime, Lords raised concerns about stablecoins enabling illicit finance. Duff Gordon pointed to Coinbase’s KYC, Anti-Money Laundering, and sanctions screening processes, and argued that onchain transparency combined with exchange-level controls could make policing illicit flows easier than traditional cash-based systems.
Regulatory Calibration at Stake
Duff Gordon pushed back on suggestions that Coinbase was trying to sidestep KYC obligations. His sharper concern was the opposite: that proposals from the Bank of England and the Financial Conduct Authority on capital requirements, holding limits, and rewards risk were calibrated too tightly, and would ultimately suppress competition.
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He warned that an overly restrictive regime would leave the UK trailing both the United States’ GENIUS Act and the European Union’s MiCA framework in attracting stablecoin business.
Adam Jackson, chief strategy officer at Innovate Finance, an independent UK fintech industry body, reinforced that concern. He argued the UK risked building a regime that was “more prescriptive and less competitive” than MiCA. “We risk being second movers but second movers who are less competitive than the first movers,” he said.
A Divided Inquiry
Wednesday’s session stood in sharp contrast to a previous committee hearing, where critics including a US law professor and a prominent financial commentator backed a tougher Bank of England stance and expressed doubt about whether stablecoins would ever become mainstream money in Britain.
US law professor Arthur E. Wilmarth Jr went further, branding the GENIUS Act a “disastrous mistake” for allowing non-banks into what he called “the money business.”
The Lords inquiry is running alongside the Bank of England’s ongoing effort to finalize its stablecoin rules, and the gap between industry’s preferred approach and the regulator’s current direction appears significant. How that gap closes will likely determine whether the UK becomes a meaningful venue for stablecoin issuers or watches that activity migrate elsewhere.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial or investment advice.
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