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

A committee from the U.K. House of Lords has recommended that the Bank of England (BOE) reevaluate its proposed restrictions on consumer stablecoin holdings, according to a recent report.

The Financial Services Regulation Committee, which encompasses members from various political parties, also suggested that the BOE reconsider its requirement that stablecoin issuers maintain at least 40% of their backing in non-interest-bearing central bank deposits. This feedback was part of their "Stablecoins: waiting for regulation" report released on Wednesday.

Stablecoins are digital assets that are linked to traditional financial assets, such as fiat currencies like the U.S. dollar or the British pound.

As central banks and legislators have been developing regulatory frameworks for stablecoin use and issuance, the BOE has been noted for its strict proposed regulations, which many industry experts believe are excessively harsh.

The proposed limits from the BOE include a cap of 20,000 pounds (approximately $27,000) per coin for individual users and 10 million pounds (around $13.5 million) for businesses. Critics argue that such limits could hinder the U.K.'s competitiveness compared to other markets that do not impose similar restrictions.

The House of Lords committee stated, "Given the early stage of the GBP stablecoin market, rather than pre-emptively impose holding limits, the Bank should consider monitoring the growth of the market and imposing holding limits only if the financial stability risks clearly warrant it."

The report also raised concerns about the backing asset regulations, indicating that they "could have a significant impact on the business viability of stablecoin issuers in the U.K."

In response, the BOE has shown intentions to relax some of its proposed restrictions. Sarah Breeden, the deputy governor for financial stability, acknowledged last month that the proposals were "overly conservative," and stated that the BOE is actively exploring alternative ways to manage the risks associated with the introduction of stablecoins.