A UK House of Lords committee said the Bank of England (BOE) should reconsider proposed limits on consumer stablecoin holdings in a new report.
The cross-party Financial Services Regulation Committee of the second chamber of the UK Parliament also recommended reconsideration of requirements for stablecoin issuers to hold at least 40% of backing assets in central bank deposits, without generating any interest in its report “Stablecoins: Awaiting Regulation” published on Wednesday.
Stablecoins are digital tokens pegged to the value of a traditional financial asset, such as a fiat currency like the US dollar or British pound.
As central banks and lawmakers have built regulatory frameworks for the use and issuance of stablecoins in recent years, the Bank of England has been notable for proposing what many industry figures considered unnecessarily harsh restrictions.
The U.K. central bank proposed limits of 20,000 pounds ($27,000) per currency for individuals and 10 million pounds ($13.5 million) for businesses, which some observers said risked making the country uncompetitive compared to neighboring markets that would not have such limitations.
“Given the early stage of the GBP stablecoin market, rather than pre-emptively imposing holding limits, the Bank should consider monitoring market growth and imposing holding limits only if the risks to financial stability clearly justify it,” the House of Lords committee said.
The report questioned the rules on asset backing, saying they “could have a significant impact on the commercial viability of stablecoin issuers in the UK.”
For its part, the BOE is planning to ease proposed restrictions, and Sarah Breeden, deputy governor for financial stability, admitted last month that they were “too conservative.”
The BOE is “carefully studying whether there are different ways to manage what we believe is a significant risk as stablecoins come into play,” Breeden said in an interview with the Financial Times.
