UK Lords warn strict stablecoin rules could make pound tokens unworkable

A committee within the UK House of Lords has issued a warning that stringent regulations for stablecoins could render pound sterling tokens commercially unviable. The committee's report, released on Wednesday, suggests that while the UK should proceed with stablecoin regulation, the rules must not impede the commercial feasibility and competitiveness of UK-issued stablecoins. The report notes that the UK is falling behind the United States and the European Union in this area, with the lack of a clear regulatory regime suppressing development and investment. This has led to the growth of global stablecoins pegged to the US dollar, such as USDT and USDC. The committee urged the Bank of England to reconsider proposed limits on stablecoin holdings and reserve requirements, arguing that early limits could restrict innovation in a sector that is still small in the United Kingdom. Lawmakers questioned the requirement for issuers to keep 40% of reserves in non-interest-bearing central bank deposits, stating such a rule could affect the commercial viability of issuers. Recent remarks from Bank of England Deputy Governor Sarah Breeden suggest that changes may be under consideration, indicating officials are reassessing how best to protect financial stability as digital payment tokens become more common.