The House of Lords has called on the Bank of England to speed up its stablecoin regulations, stating the UK risks losing a key opportunity without faster action. The Financial Services Regulation Committee criticized the central bank’s proposed safeguards as more restrictive than current rules for digital and traditional payments.
Proposed rules could stifle growth
The Bank of England’s plan requires 40% of stablecoin backing assets to be held in non-interest-bearing central bank deposits. It also sets a £20,000 individual holding limit per coin and a £10 million cap for businesses. These conditions, the Lords argue, could discourage commercial banks from issuing stablecoins, leaving the UK behind.
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Stablecoins—digital currencies tied to assets like the pound or dollar—have become popular for faster, cheaper cross-border payments. While the UK has delayed finalizing its framework, other regions are advancing. Europe’s Markets in Crypto-Assets (MiCA) regulation, effective July 1, will require crypto firms to obtain full authorization or stop operating. Of 1,200 firms with legacy registrations, only 210 have secured approval.
Global competition is heating up
Other countries are also recognizing stablecoins’ potential. In the U.S., the GENIUS Act and CLARITY Act aim to integrate them into the financial system as recognized payment infrastructure. Japan, where cash remains dominant, has seen three major banks—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group—announce plans to jointly issue stablecoins within the year. These developments show a move toward mainstream use, even in conservative markets.
Dollar-denominated stablecoins account for over 99% of the $320 billion in circulation. Sterling-based stablecoins represent less than half a percent, according to UK Treasury figures. Without a clear regulatory framework, the UK will keep losing ground to the U.S. and Europe. Adopting the Lords’ recommendations could help the country lead in sterling-denominated stablecoin infrastructure, reducing dependence on the dollar.
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The Lords’ push comes as the Bank of England reviews its proposed holding caps and reserve rules. While the central bank’s willingness to reconsider is encouraging, time is running short.
The UK cannot afford delays. If the Bank of England moves too slowly, it may end up following others in a market where rivals are already building infrastructure. The Lords have presented their argument. The decision now rests with the central bank.
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