Key Takeaways:
The House of Lords Financial Services Regulation Committee urged the Bank of England to reconsider proposed stablecoin holding limits and backing asset requirements.
The cross-party committee published a report Wednesday calling on the BoE to drop its plan to cap individual stablecoin holdings at 20,000 pounds ($27,000) and business holdings at 10 million pounds ($13.5 million), arguing the restrictions risked undermining the UK's competitiveness as a stablecoin hub. The report also questioned the central bank's proposal requiring issuers to hold at least 40% of backing assets in unremunerated central bank deposits, saying the rule "could have a significant impact on the business viability of stablecoin issuers in the UK."
"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 committee said in its "Stablecoins: waiting for regulation" report.
The BoE had proposed the limits as part of a broader regulatory framework for systemic stablecoins used for payments, alongside requirements for backing assets to be held in central bank reserves. Sarah Breeden, the BoE's deputy governor for financial stability, acknowledged last month that the proposals were "overly conservative" and said the central bank was "looking very hard at whether there are different ways we can manage what we think is an important risk."
The committee's intervention comes as the UK government advances the Financial Services and Markets Bill 2026-27, introduced to Parliament on May 19, which includes provisions to bring stablecoin payments within the regulated payments framework. HM Treasury has also published a draft statutory instrument exempting UK-issued qualifying stablecoins from cryptoasset dealing and arranging requirements under the new crypto regime, which is set to commence in October 2027.
Regulatory momentum builds
The BoE and the Financial Conduct Authority published a shared vision for tokenisation in wholesale markets on May 18, with the BoE targeting delivery of a synchronisation service enabling digital asset ledgers to access programmable settlement in central bank money by 2028. The Prudential Regulation Authority separately issued guidance clarifying that banking groups issuing e-money or stablecoins should ensure those products are clearly distinguished from deposit products and issued from a separate, insolvency-remote entity.
UK Finance, the banking industry trade group, estimated in a May 11 report that modernising the UK's retail payments infrastructure could generate as much as 9 billion pounds in annual economic uplift. The group called on regulators to finalize the stablecoins framework to enable the development of regulated, interoperable forms of digital money.
What's at stake
The UK is competing with the European Union and the United States to attract stablecoin issuers. The EU's Markets in Crypto-Assets Regulation, which takes full effect on July 1, imposes no individual holding limits on stablecoin users, while the US has advanced stablecoin legislation through the House Financial Services Committee. Industry estimates cited by McKinsey project stablecoins could reach $2 trillion to $4 trillion in total value by 2030, up from roughly $200 billion today.
The BoE's consultation on extending RTGS and CHAPS settlement hours toward near 24/7 operation, published May 18, is open for responses until Aug. 10. The government's broader consultation on payment services reforms, including the approach to stablecoin payments, is expected before the end of June.
This article is for informational purposes only and does not constitute investment advice.
