The House of Lords is telling the Bank of England to back off on stablecoins.

A cross-party committee in the UK's House of Lords has formally called on the Bank of England to rethink two of its most controversial stablecoin proposals, warning that heavy-handed rules risk stunting a market that has barely left the starting blocks.

What the Lords Are Objecting To

The Financial Services Regulation Committee, chaired by Baroness Noakes DBE, published a report taking direct aim at two specific measures. The first is a proposed cap limiting individual consumers to holding no more than £20,000 in sterling stablecoins. The second is a requirement for issuers to park at least 40% of their backing assets in non-interest-bearing deposits at the Bank of England itself.

On the holding cap, the committee's position is straightforward. "Rather than pre-emptively impose holding limits, the Bank should consider monitoring the growth of the market and imposing holding limits only if the financial stability risks clearly warrant it," the committee said.

The reserve requirement drew equally pointed criticism. The report questioned the rules on backing assets, saying they "could have a significant impact on the business viability of stablecoin issuers in the UK." The concern is that forcing issuers to hold a large share of reserves in zero-yield central bank deposits makes the economics of running a UK-based stablecoin operation difficult to justify.

The Competitive Stakes

Baroness Noakes noted that dollar stablecoins dominate the global market, and stated plainly that "the UK is lagging behind compared with the US and the EU." With the vast majority of stablecoins in circulation remaining dollar-pegged, the window to establish a credible sterling alternative is narrow.

The committee warned that any slippage in the regulatory timetable will entrench the dominance of dollar-backed tokens and leave UK challenger banks, payment firms, and small businesses on the wrong side of an emerging global infrastructure.

The Bank of England is not entirely digging in. Deputy Governor Sarah Breeden has admitted the proposals were "overly conservative" and said the Bank is "looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play." Separately, at CityWeek 2026 in London, Breeden confirmed the central bank is abandoning its proposed individual holding limits for sterling stablecoins, shifting instead toward aggregate issuance caps placed on token providers.

The Bank of England is expected to publish revised draft rules in June 2026, with final Codes of Practice for systemic stablecoins due by late 2026.

Sources:
CoinDesk: UK House of Lords Committee Calls on Bank of England to Reconsider Proposed Stablecoin Restrictions
Business Matters: Lords Warn Treasury Not to Delay Sterling Stablecoin Rules
Crypto Times: UK Lawmakers Push BOE to Ease Stablecoin Rules Amid Growth Concerns