TLDR
- A House of Lords committee has called on the Bank of England to revisit planned restrictions on stablecoin ownership.
- Lawmakers recommend implementing holding caps exclusively when definitive financial stability threats materialize.
- The report challenges the proposal requiring issuers to maintain 40 percent of reserves in zero-interest central bank accounts.
- Deputy Governor Sarah Breeden acknowledged the central bank is examining whether initial proposals took an excessively cautious approach.
A recent parliamentary report has called on the Bank of England to reassess its proposed restrictions governing stablecoin holdings and reserve standards.
The Financial Services Regulation Committee of the House of Lords released findings in a document entitled “Stablecoins: waiting for regulation,” recommending the central bank delay implementing stringent caps until the market matures sufficiently to demonstrate actual risk patterns. Committee members expressed concern that premature restrictions might stifle innovation within a sector that currently maintains a modest presence in the United Kingdom.
Committee Advocates Risk-Based Regulatory Approach
The Bank of England’s current proposal would establish a £20,000 ceiling on individual stablecoin holdings per token, with corporate entities facing a £10 million threshold per coin. Industry stakeholders have raised concerns that such limitations could diminish the U.K.’s competitive position relative to jurisdictions pursuing less restrictive regulatory paths.
The House of Lords committee recommended the Bank track the expansion of pound-denominated stablecoins and implement ownership restrictions exclusively when transparent financial stability risks warrant such measures. While acknowledging potential hazards, lawmakers suggested proactive controls may be premature given current market conditions.
The committee’s examination extended to the Bank’s proposal mandating that stablecoin issuers maintain a minimum of 40% of backing assets in zero-yield central bank deposits. Parliamentary members cautioned that this requirement could undermine the economic sustainability of companies choosing to establish operations in the U.K.
Stablecoins represent digital assets engineered to preserve a stable value relative to conventional currencies including the U.S. dollar or British pound. As regulatory bodies worldwide develop frameworks for digital asset oversight, the Bank of England has adopted a more conservative position than numerous international counterparts.
Central Bank Acknowledges Potential Policy Adjustments
Statements from senior Bank officials suggest internal discussions about modifying the proposed framework. Sarah Breeden, serving as deputy governor for financial stability, revealed to the Financial Times that initial proposals may have been “overly conservative.” Breeden confirmed the central bank is evaluating alternative approaches to managing stablecoin-related risks without imposing inflexible restrictions.
Although updated guidelines have yet to be released, Breeden’s public statements signal ongoing deliberations about striking an appropriate balance between safeguarding financial stability and accommodating the expanding role of digital payment instruments. The House of Lords committee report intensifies legislative pressure for regulations that maintain oversight while supporting market development.
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