Key facts
- The UK's House of Lords has urged the Bank of England (BoE) to review its proposed stablecoin regulations.
- The committee expressed concerns that current proposals could hinder innovation and UK's global market competitiveness.
- Specific concerns include requirements for reserve asset allocation, redemption mechanisms, and holding limits for stablecoins.
- The report suggests that regulators should reevaluate the 40% unremunerated bank deposit requirement for reserves.
- The House of Lords also recommended reconsidering holding limits for individuals and businesses.
- The committee highlighted the need for clarity on the transition to joint regulation by the BoE and FCA.
The UK's House of Lords, through its Financial Services Regulation Committee, has called on the Bank of England (BoE) to re-evaluate certain aspects of its proposed stablecoin regulations. While supporting the core principles like 1:1 backing and a backstop lending facility, the committee raised concerns about specific requirements that could stifle innovation and harm the UK's global competitiveness. The report highlights issues with the proposed 40% reserve requirement in unremunerated bank deposits and the suggested holding limits of £10,000-£20,000 for individuals and £10 million for businesses. The committee argues these measures could create significant operational burdens and unnecessarily restrict the growth of pound-denominated stablecoins. Additionally, the report points to a lack of clarity regarding the transition of regulatory oversight from the Financial Conduct Authority (FCA) to a joint regime with the BoE, and uncertainty about HM Treasury's plans for classifying systemic stablecoins. The House of Lords emphasizes the need for a flexible and clear regulatory regime to ensure stablecoins can compete effectively with other payment methods, warning that failure to do so risks the UK lagging behind international counterparts with more established frameworks.