The UK House of Lords has recommended a review of the Bank of England's proposed stablecoin regulations, citing concerns over competitiveness and market growth.
The U.K. House of Lords has urged the Bank of England (BOE) to reassess its proposed limits on consumer stablecoin holdings. This recommendation comes from the Financial Services Regulation Committee, which includes members from various political backgrounds.
In their recently published report titled "Stablecoins: waiting for regulation," the committee suggested that the BOE reconsider its requirement for stablecoin issuers to keep at least 40% of their backing in non-interest-bearing central bank deposits.
Stablecoins are digital currencies tied to traditional assets, such as fiat currencies like the British pound and the U.S. dollar. As regulatory frameworks for stablecoin use evolve, the BOE has been noted for its stringent proposed regulations that some industry experts consider overly restrictive.
The BOE's current proposals suggest a cap of £20,000 (approximately $27,000) per stablecoin for individual users and £10 million (around $13.5 million) for businesses. Critics warn that these limits could diminish the U.K.'s competitive edge compared to other markets with fewer restrictions.
The committee emphasized that, given the nascent stage of the GBP stablecoin market, the BOE should monitor its growth rather than impose preemptive holding limits unless financial stability risks become evident. They also expressed concerns that the backing asset regulations might significantly affect the viability of stablecoin issuers in the U.K.
In light of this feedback, the BOE is considering easing some of its proposed regulations. Sarah Breeden, the deputy governor for financial stability, acknowledged last month that the initial proposals were "overly conservative" and indicated the BOE is looking into alternative risk management strategies for stablecoins.
