The UK House of Lords Financial Services Regulatory Committee stated that if the UK fails to produce clearer and more commercially viable stablecoin rules soon, it risks falling further behind in the global digital payments competition. The committee believes that current uncertainty is already slowing down domestic stablecoin projects, particularly impacting the development of sterling stablecoins.

Unclear regulation slows down development

In its latest report, the committee stated that the UK had the opportunity to play a larger role in digital financial infrastructure, but unclear rules and slow implementation times are dampening investment. The report noted that industry interest in sterling stablecoins has not disappeared, but many participants worry that a prolonged wait will drive innovation and capital to markets with clearer rules.

The committee believes that regulatory design needs to balance financial stability and market competitiveness. If the rules only emphasize risk control while ignoring the commercial viability of the products, the UK's domestic stablecoin market may struggle to achieve significant scale.

The Bank of England's plan is under scrutiny.

The report specifically names some of the proposed arrangements by the Bank of England. According to the proposed arrangements, systemically important stablecoin issuers may need to deposit 40% of their reserve assets in non-interest-bearing central bank deposits.

The committee pointed out that while such requirements are intended to enhance security, they also directly reduce issuers' profit margins and weaken product appeal. If UK-issued stablecoins are significantly less cost-effective and offer lower returns than those in other jurisdictions, such business is more likely to shift overseas.

• One of the proposed requirements is that 40% of reserves be held in non-interest-bearing central bank deposits.
• The committee believes this will weaken the commercial appeal of UK stablecoins.
• The report calls for avoiding protectionist measures that stifle the development of the domestic market.

The US and Europe are advancing faster.

The report also points out that the current global stablecoin market is still dominated by US dollar stablecoins, with USDT and USDC continuing to hold the major share, while the size and influence of British pound stablecoins are relatively limited.

The committee warned that if the UK fails to establish a competitive domestic framework, its future payment and settlement system may become more reliant on digital currency products issued overseas. This not only affects the development of domestic businesses but also the UK's position in the next generation of financial infrastructure.

Meanwhile, both the US and the EU are accelerating the regulation of stablecoins. The US Congress is still pushing for related legislation, including the GENIUS Act, while the EU has begun implementing the MiCA framework. The committee stated that if the UK hopes to maintain its competitiveness, it needs to expedite the implementation of stablecoin rules.