UK Lords committee urges BoE to ease stablecoin rules

A parliamentary committee has urged the Bank of England to reconsider key elements of its proposed stablecoin regulations, warning that overly restrictive rules could stifle the development of a British pound-denominated market. The House of Lords Financial Services Regulation Committee issued its report this week, calling for a balanced regulatory approach that fosters innovation while managing risk.

The cross-party committee endorsed much of the framework proposed by the Bank of England and the Financial Conduct Authority, including a requirement for stablecoin issuers to hold high-quality backing assets on a one-to-one basis. It also supported the creation of a central bank liquidity facility for systemic payment stablecoins. However, lawmakers raised significant concerns about specific proposals they argue could undermine the commercial viability of UK-issued tokens.

In particular, the committee criticized a plan requiring issuers to hold a substantial portion of their reserves—reportedly around 40 percent—as non-interest-bearing deposits at the Bank of England. The report stated this requirement could harm issuer profitability and make the UK less competitive...