Headline: UK Lords urge Bank of England to rethink strict stablecoin rules, warn measures could stifle market
A cross-party committee in the U.K. House of Lords has urged the Bank of England (BoE) to reconsider several of its tougher proposed restrictions on stablecoins, saying the rules could unnecessarily undermine the nascent pound stablecoin market. The Financial Services Regulation Committee — part of the Lords, Parliament’s second chamber — made the call in its report “Stablecoins: waiting for regulation,” published Wednesday.
Stablecoins are digital tokens designed to hold a stable value by being pegged to traditional assets such as fiat currencies. As regulators worldwide move to formalize rules, the BoE stood out for proposing what many in the industry called particularly stringent limits: maximum holdings of £20,000 ($27,000) per individual and up to £10 million ($13.5 million) for firms, along with a requirement that at least 40% of issuers’ backing assets be held in central bank deposits that earn no interest.
The Lords committee warned those measures could hamper business viability and make the U.K. less competitive compared with markets that impose fewer restrictions. “Given the early stage of the GBP stablecoin market, rather than pre-emptively impose holding limits, the Bank should consider monitoring the market and imposing limits only if financial stability risks clearly warrant it,” the report says.
The BoE appears receptive to criticism: deputy governor for financial stability Sarah Breeden last month described the initial proposals as “overly conservative” and said the bank is exploring alternative ways to manage the risks posed by stablecoins as they gain traction. The upcoming regulatory approach will be watched closely by issuers and crypto firms hoping the U.K. strikes a balance between investor protection and fostering an innovation-friendly environment.
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