UK House of Lords Urges Bank of England to Rethink Stablecoin Limits

The United Kingdom’s House of Lords Financial Services Regulation Committee has called on the Bank of England (BOE) to reconsider its proposed restrictions on stablecoins, arguing that the measures could hinder the growth of the country’s emerging digital asset sector.

In a report titled “Stablecoins: Waiting for Regulation,” published on Wednesday, the cross-party committee urged the central bank to review its proposed limits on consumer stablecoin holdings and reassess reserve requirements for stablecoin issuers. The recommendations come as the UK continues developing a regulatory framework for digital assets and blockchain-based payments.

Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to traditional assets such as fiat currencies, including the British pound and the U.S. dollar. They are increasingly viewed as a key component of the digital finance ecosystem due to their potential for faster and more efficient payments.

The Bank of England previously proposed limiting individual holdings of a single stablecoin to £20,000 (approximately $27,000) and setting a £10 million ($13.5 million) cap for businesses. Critics within the crypto industry have argued that these restrictions are more stringent than those in competing jurisdictions and could reduce the UK’s attractiveness as a hub for digital asset innovation.

According to the committee, imposing holding limits before the market has fully developed may be premature. Instead, lawmakers suggested that regulators monitor the growth of the pound-backed stablecoin market and introduce restrictions only if financial stability concerns become significant.

The report also raised concerns about the BOE’s proposal requiring stablecoin issuers to keep at least 40% of their reserve assets in non-interest-bearing central bank deposits. The committee warned that such requirements could negatively affect the commercial viability of stablecoin businesses operating in the UK.

The recommendations align with recent comments from BOE Deputy Governor for Financial Stability Sarah Breeden, who acknowledged that some of the original proposals may have been “overly conservative.” Breeden recently indicated that the central bank is exploring alternative approaches to managing risks associated with stablecoin adoption while supporting innovation in the digital payments sector.

The debate highlights the UK’s ongoing effort to balance financial stability, consumer protection, and competitiveness as global jurisdictions race to establish clear cryptocurrency and stablecoin regulations.