UK House Of Lords Urges BoE To Ease Stablecoin Rules Over Competitiveness Concerns

The House of Lords, the upper chamber of the UK parliament, has urged financial regulators to reconsider some of their controversial stablecoin proposals, warning that the country risks falling behind global leaders if regulation is not done right.

The committee affirmed its support for many of the central bank’s proposals, including the requirement that issuers back stablecoins 1:1 and the backstop lending facility. However, it noted that aspects of the proposals “need further consideration.”

It also suggested a temporary cap on stablecoin ownership, setting holding limits of £10,000 to £20,000 for individuals and £10 million for businesses. The measure resembled the BoE’s proposed approach to the digital pound, aiming to mitigate financial stability risks “stemming from large and rapid outflows of deposits from the banking sector.”

The policymakers consider that regulators should reevaluate the asset allocation and redemption requirements, citing the “considerable operational burdens this would create” and potential negative impact on the sustainability of stablecoin issuers and the UK’s global market competitiveness.

It also shared concerns about the lack of clarity on the transition from the Financial Conduct Authority’s (FCA) regime to joint regulation alongside the BoE, and the uncertainty surrounding HM Treasury’s plans to determine whether stablecoins are systemic and to bring them into the payments regulatory perimeter.

The Committee affirmed that the shape of the pound-denominated stablecoin market will be “strongly influenced by the direction of the regulatory regime,” and authorities must “create a level playing field so that stablecoins can compete with other forms of payment in the UK.”

Therefore, the regime must be flexible, responsive, and clear to accommodate future innovations, or the UK will risk “lagging behind global counterparts, where regulatory regimes are more established and provide clarity for market participants.”