The UK House of Lords Financial Services Regulation Committee has published a report entitled "Stablecoins: Waiting for Regulation," revealing that the total market capitalization of global stablecoins has surpassed $310 billion, yet the sterling stablecoin market remains in its infancy. The report highlights that the UK's regulatory framework is significantly behind those of the United States (the GENIUS Act) and the European Union (MiCAR), leaving the pound-denominated stablecoin sector without clear guidance.
The report delivers pointed criticism of several proposals currently under consideration by the Financial Conduct Authority (FCA) and the Bank of England. Among the most contentious is the requirement for systemic stablecoin issuers to park at least 40% of their reserve assets in non-interest-bearing deposits at the central bank. Industry participants argue this would severely erode profitability and undermine the UK's competitiveness as a hub for stablecoin issuance. The proposed individual holding limit of £20,000 and corporate limit of £10 million are also called out for being extremely difficult to enforce and likely to stifle the growth of the sterling stablecoin ecosystem. Additionally, the T+1 redemption requirement—forcing issuers to settle redemptions by the next business day—would impose a heavy operational burden, necessitating persistently high liquidity buffers. The Prudential Regulation Authority's ban on deposit-taking institutions issuing stablecoins under independent brands is also criticized as excessively restrictive, hampering innovation from traditional finance.
On a more positive note, the report commends the Bank of England's planned liquidity support lending facility, describing it as an innovative regulatory measure that surpasses those of other major jurisdictions. The facility could provide much-needed liquidity backstops for issuers under extreme market stress. The Committee calls on all regulators to adhere strictly to the established timeline, ensuring that a comprehensive regulatory framework takes full effect by October 25, 2027. It further recommends a principle-based, technology-neutral approach to strike a proper balance between safeguarding financial stability and fostering market innovation.