TLDR
- The U.K. House of Lords has asked the Bank of England to reconsider proposed limits on stablecoin holdings.
- The committee said holding caps should apply only if clear financial stability risks emerge.
- Lawmakers questioned the requirement for issuers to keep 40 percent of reserves in non-interest-bearing central bank deposits.
- Sarah Breeden said the Bank of England is reviewing whether its earlier proposals were overly conservative.
The U.K. House of Lords has urged the Bank of England to reconsider proposed limits on stablecoin holdings and reserve requirements in a new report.
The cross-party Financial Services Regulation Committee said in its report, titled “Stablecoins: waiting for regulation,” that the central bank should avoid imposing strict caps before the market has developed enough to test real risks. Lawmakers argued that early limits could restrict innovation in a sector that is still small in the United Kingdom.
Committee Urges Flexible Stablecoin Oversight
Under proposals published by the Bank of England, individuals would face a £20,000 limit per stablecoin, while businesses would be restricted to £10 million per coin. Several industry participants have previously warned that these caps could make the U.K. less attractive than other jurisdictions that do not plan similar thresholds.
In its findings, the House of Lords committee stated that the Bank should monitor the growth of sterling-backed stablecoins and introduce holding limits only if financial stability concerns clearly require intervention. The committee did not dismiss the risks but said pre-emptive controls may not be justified at this stage of market development.
Beyond holding caps, the committee also addressed the Bank’s proposed requirement that at least 40% of a stablecoin’s backing assets be kept in non-interest-bearing deposits at the central bank. Lawmakers wrote that such a rule could affect the commercial viability of issuers operating in the U.K.
Stablecoins are digital tokens designed to maintain a fixed value against traditional currencies such as the U.S. dollar or the British pound. As governments and regulators build legal frameworks for their use, the Bank of England has taken a cautious stance compared with some other regulators.
Bank of England Signals Flexibility
Recent remarks from within the central bank suggest that changes may be under consideration. Sarah Breeden, the Bank’s deputy governor for financial stability, told the Financial Times last month that the original proposals were “overly conservative.” Breeden said the Bank is reviewing whether different approaches could manage risks tied to stablecoins without relying on rigid limits.
While the Bank has not published revised rules, Breeden’s comments indicate that officials are reassessing how best to protect financial stability as digital payment tokens become more common. The House of Lords committee’s report adds parliamentary pressure for a regulatory framework that balances oversight with room for market growth.
