Catenaa, Wednesday, June 03, 2026- A committee of the UK House of Lords has called on the Bank of England to reconsider key elements of its proposed stablecoin framework, warning that strict limits on holdings and reserve requirements could damage the country’s ability to compete in the rapidly expanding digital asset sector.
In a report published Wednesday, the cross-party Financial Services Regulation Committee urged the central bank to review plans that would limit individual stablecoin holdings to £20,000 and business holdings to £10 million.
The committee argued that imposing restrictions before the market has fully developed risks discouraging innovation and investment in Britain’s emerging digital finance industry.
The report also challenged proposed rules requiring stablecoin issuers to hold at least 40% of reserve assets as non-interest-bearing deposits at the Bank of England.
Lawmakers said the measure could significantly affect the commercial viability of stablecoin businesses operating in the UK.
Stablecoins are digital tokens designed to maintain a stable value by linking their price to traditional assets such as national currencies.
They have become a critical part of global crypto markets, supporting trading activity, cross-border payments, decentralized finance applications and tokenized financial products.
As governments worldwide develop regulatory frameworks for digital assets, stablecoins have emerged as one of the most heavily scrutinized sectors due to their growing importance within the financial system.
The Bank of England has consistently adopted a cautious approach toward stablecoin regulation, emphasizing financial stability risks and the potential impact on traditional banking systems.
Its proposals have often been viewed as among the most conservative approaches under consideration in major financial jurisdictions.
The House of Lords committee warned that strict holding limits could place the UK at a competitive disadvantage compared with other financial centers.
Many rival jurisdictions, including parts of Europe, Asia and the Middle East, are developing stablecoin frameworks without imposing comparable restrictions on user holdings.
Lawmakers said regulators should monitor the market’s growth and introduce limits only if financial stability concerns become clearly evident.
The committee argued that pre-emptive restrictions could discourage both issuers and users from participating in the UK market.
Industry groups have repeatedly warned that excessive regulation could drive stablecoin activity toward more accommodating jurisdictions.
That concern has become increasingly important as governments compete to attract blockchain companies, fintech investment and digital asset infrastructure projects.
The report also focused heavily on reserve management rules proposed by the central bank.
Under the current framework, stablecoin issuers would be required to maintain a large portion of reserves at the Bank of England in accounts that do not generate interest income.
The committee questioned whether such requirements could undermine sustainable business models for stablecoin providers.
Stablecoin issuers typically generate revenue through returns on reserve assets, making reserve management a critical component of their economic structure.
Analysts said forcing large amounts of capital into non-yielding central bank deposits could substantially reduce profitability.
That issue has become particularly relevant as stablecoin competition intensifies globally.
Major issuers increasingly compete not only on liquidity and compliance but also on the efficiency of their reserve structures.
The committee’s intervention comes as senior Bank of England officials appear increasingly open to revising earlier proposals.
Last month, Deputy Governor Sarah Breeden acknowledged that some of the original restrictions may have been overly conservative.
Breeden indicated that the central bank was actively exploring alternative approaches capable of managing financial stability risks without unnecessarily constraining market development.
Her comments were viewed by industry observers as a signal that regulators may be moving toward a more balanced framework.
The review also reflects broader changes occurring across global stablecoin regulation.
The European Union recently implemented the Markets in Crypto-Assets framework, while lawmakers in the United States continue debating competing stablecoin bills aimed at creating national standards.
The UK’s decision on stablecoin regulation could influence its broader ambitions as an international financial technology hub.
Governments increasingly view digital assets, tokenization and blockchain-based payment systems as strategic areas of future economic growth.
Several major banks, asset managers and payment firms have already expanded stablecoin-related operations during 2025 and 2026.
Analysts said jurisdictions that strike an effective balance between innovation and regulation may attract significant investment as digital finance infrastructure expands.
The House of Lords report suggests growing political concern that excessive caution could limit Britain’s role in that transformation.
The Bank of England has not yet announced whether it will formally amend the proposed framework, but lawmakers have increased pressure for a regulatory approach that protects financial stability while allowing the stablecoin market to develop more naturally.
