A cross-party committee in the UK House of Lords has recommended that the Bank of England reassess proposed restrictions on stablecoins. The committee believes that the sterling stablecoin market is still in its early stages, and setting overly strict thresholds prematurely could affect the UK's attractiveness in this area.
The committee opposes pre-set limits.
The Bank of England previously proposed a cap of £20,000 for individuals and £10 million for businesses holding each stablecoin. In its latest report, the House of Lords Financial Services Oversight Committee stated that instead of imposing limits prematurely, it would be better to observe market growth and then decide whether to intervene based on financial stability risks.
The committee stated that holding limits are only necessary when risks are clearly apparent. Imposing restrictions at this stage could put the UK at a disadvantage in the regulatory competition for stablecoins.
The requirement of 40% interest-free deposits is being questioned.
The report also highlighted another proposed rule requiring stablecoin issuers to hold at least 40% of their reserve assets in non-interest-bearing central bank deposits. The committee believes this requirement could significantly impact the viability of issuers operating in the UK.
- Individual holding limit: £20,000 for each stablecoin
- Corporate holding cap: £10 million
- Reserve requirement: At least 40% must be interest-free central bank deposits.
For issuers that rely on reserve income to maintain operations, a higher proportion of interest-free deposits may compress revenue margins and affect their willingness to develop related products in the UK.
The Bank of England has discussed easing measures.
The Bank of England has recently signaled a shift in policy. Sarah Breeden, Deputy Governor for Financial Stability, stated last month that the existing approach is "too conservative" and the central bank is seriously studying whether alternative methods can be used to manage the risks associated with stablecoins.
This means that the UK's stablecoin regulatory framework is still under adjustment. The current debate has shifted from whether to regulate at all to what level of restriction should be imposed.
