British lawmakers have urged the Bank of England (BoE) to soften its proposed rules for stablecoins, warning that overly strict requirements could impede the development of a nascent sterling-backed market. A cross-party House of Lords committee, in a report issued on Wednesday, advised the central bank to reconsider proposals that include capping the amount of stablecoins held by individuals and businesses, and requiring issuers to back tokens with non-interest-bearing deposits. Stablecoins are a type of cryptoasset designed to hold a steady value, usually by being pegged to a fiat currency. The market is currently dominated by U.S. dollar-linked tokens, with sterling-denominated stablecoins making up only a tiny fraction of those in use.
The House of Lords Financial Services Regulation Committee stated, “The Bank, [Financial Conduct Authority] and HM Treasury must recognise that the stablecoin market is nascent and growing, and adapt the regulatory regime as the market develops.” UK authorities are aiming to finalise stablecoin regulations by the end of the year, intending to align broadly with approaches taken in the United States. The committee’s recommendations highlight a desire for a regulatory framework that fosters innovation while ensuring market stability.
The Bank of England, whose forthcoming rules will apply to “systemic” stablecoins – those extensively used for everyday payments – has previously indicated that its protective measures are vital to avert a potential shift from traditional bank deposits into stablecoins, which could trigger a credit crunch. However, committee chair Sheila Noakes, a Conservative lawmaker, expressed doubts that the BoE had adopted the correct strategy to address these concerns, advocating for a “principles-based, less prescriptive approach.” In a recent speech, BoE Deputy Governor Sarah Breeden hinted that the central bank was reconsidering its proposed holding limits. A BoE spokesperson confirmed that the final policy and draft rules for systemic stablecoins are slated for publication later in June.
