Lawmakers urge regulators to keep stablecoin timelines, question 40% reserve requirement as US and EU move ahead. The committee wants flexible rules for holding limits and commercial bank issuance.
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UK lawmakers have put the Bank of England on notice to finalise stablecoin rules without further drift. The House of Lords Financial Services Regulation Committee released a report urging regulators to keep current timelines and avoid delays that could weaken the UK’s position in global digital payments. The report warns that slow action risks handing the advantage to the US and EU, where stablecoin frameworks are already moving ahead.
The committee’s core message is that a sterling stablecoin market could support faster, cheaper payments and programmable services. Baroness Noakes, the committee chair, stated directly:
“The UK is lagging behind compared with the US and the EU.”
She added that the country was now moving in the right direction. The report argues that the UK’s established financial services industry gives it a base to build a sterling stablecoin market. Lawmakers said regulators should allow that market to form and grow without premature constraints.
The committee questioned the BOE’s proposed requirement that stablecoin issuers hold 40% of backing assets in central bank deposits that earn no interest. The report called this an “unremunerated” burden that could affect how issuers manage reserves. It recommended the bank reconsider the level, arguing it may distort issuer behaviour and reduce the appeal of launching in the UK versus other jurisdictions.
Lawmakers urged regulators not to impose holding limits on stablecoin users until risks justify them. The report stated that early limits could restrict GBP stablecoin growth and innovation. This contradicts the BOE and FCA’s cautious approach of capping individual exposure before seeing real-world usage data. The committee wants evidence-based limits rather than prophylactic caps.
The committee addressed proposed Prudential Regulation Authority (PRA) rules requiring separate branding and insolvency-remote entities for banks issuing stablecoins. It recommended changes to these rules, arguing they could discourage commercial banks from entering the market. The report wants a level playing field between bank and non-bank issuers. The existing proposals would create extra operational costs for banks, potentially steering them away from the market altogether.
The committee did not oppose the core safety measures. It backed the requirement for stablecoin issuers to hold one-to-one backing assets at all times. It also welcomed the BOE’s proposed backstop lending facility to cover shortfalls. These elements are seen as essential for financial stability and consumer protection. Lawmakers agreed with much of the BOE and FCA framework. They described the current proposals as a solid foundation.
The criticism focuses on specific design choices that could shape the market’s competitive dynamics. The committee wants final rules that give firms certainty and market confidence, not a regime that diverges sharply from US and EU approaches.
The European Union already has MiCA in effect for stablecoin issuers. The US is advancing its own stablecoin bill through Congress with bipartisan support. Both frameworks allow for commercial bank issuance and do not impose unremunerated reserve requirements at the level the BOE is considering. The committee’s report argues that the UK’s divergence creates a competitive disadvantage.
Lawmakers urged regulators to avoid applying a harsher risk lens to stablecoins. They asked authorities to compare risks with other payment methods fairly. The report further urged HM Treasury to review rules for private unhosted wallets. It asked officials to consider legislation if current laws cannot deter illicit activity.
The BOE and FCA are expected to publish final rules later this year. The House of Lords report adds political pressure to stick to that timeline. Any further delay would increase uncertainty for firms already developing GBP stablecoins. Conversely, early alignment with global norms could attract issuers to London.
The House of Lords report signals that UK regulators are under political pressure to avoid over-correcting. The stablecoin risk to traders is not an imminent collapse but a slow erosion of the UK’s ability to offer competitive digital asset services. If the BOE bends on the 40% deposit rule and holding limits, GBP stablecoin liquidity could expand quickly. If it holds firm, the UK risks becoming a testing ground for a restrictive framework that issuers will bypass.
Practical rule: Monitor the BOE’s response to the committee’s recommendations. Any public signal that it will revisit the reserve requirement is a positive catalyst for GBP stablecoin projects. A reaffirmation of the current proposals without change would be a bearish signal for UK crypto market development.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.