What did the UK House of Lords say about pound stablecoin regulation?

A House of Lords committee supported stablecoin regulation but warned that some proposed rules could make pound sterling stablecoins commercially unviable. The committee said the UK should regulate the sector without driving innovation and investment elsewhere.

Why are UK lawmakers concerned about the Bank of England's stablecoin proposals?

The committee believes some proposed requirements could make it difficult for sterling stablecoin issuers to operate profitably. It warned that overly restrictive rules could reduce the competitiveness of UK-issued stablecoins compared with US dollar-based rivals.

What stablecoin rules are being criticised by the House of Lords?

The committee highlighted a proposal requiring systemic stablecoin issuers to hold at least 40% of reserves in non-interest-bearing Bank of England deposits. It also raised concerns about temporary holding limits for businesses and individuals using pound stablecoins.

How would the proposed reserve requirements affect sterling stablecoins?

Holding a large share of reserves in unremunerated central bank deposits could reduce the income stablecoin issuers earn from backing assets. That may weaken business models and make UK-issued stablecoins less attractive than competing products in other jurisdictions.

Why is the UK worried about falling behind the US and EU in stablecoins?

The committee said the lack of a clear regulatory framework has suppressed stablecoin development and investment in the UK. Meanwhile, US dollar-pegged stablecoins such as USDT and USDC have grown rapidly and dominate the global market.

Will UK stablecoin holders be allowed to earn interest?

Under the Bank of England's draft framework, holders of systemic sterling stablecoins would not receive interest payments. The committee warned that combining an interest ban with strict reserve rules could hurt the competitiveness of UK-issued tokens.

How does the UK's approach compare with the EU and US?

The proposed UK rules are broadly similar to the EU's MiCA framework, which also prohibits interest payments on stablecoins. The US GENIUS Act likewise restricts payment stablecoin issuers from paying interest, although debate continues over rewards offered by intermediaries.

What are the main bull and bear arguments for UK stablecoins?

Bulls argue that clear regulation could support innovation, improve consumer confidence and create a competitive pound-denominated digital payment market. Bears argue that excessive restrictions could prevent issuers from building sustainable businesses and limit adoption.

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UK Lords warn pound stablecoin rules risk relevance

Written by Jon CuthbertPublished Jun. 3 2026Last Updated Jun. 3 2026

A House of Lords committee has warned that parts of the Bank of England’s proposed stablecoin framework could undermine the viability of pound-denominated stablecoins despite supporting the introduction of regulation.

The Financial Services Regulation Committee said the UK is lagging behind the US and EU in developing a stablecoin market and that regulatory uncertainty has held back investment and innovation.

“Considerable criticism” has been directed at a proposal requiring systemic issuers to hold at least 40% of backing assets in unremunerated central bank deposits, which the committee said could damage issuer viability and the competitiveness of the UK market.

The report supports requirements for fiat-backed stablecoins to maintain 1:1 reserves in high-quality assets and also backs a proposed Bank of England lending facility for systemic issuers.

The committee additionally warned that temporary holding limits on businesses and individuals could unnecessarily restrict the growth of sterling stablecoins and prove difficult to implement in practice.

Peers also raised concerns that a ban on interest payments for holders, combined with strict reserve requirements and uncertainty around non-interest rewards, could weaken the commercial appeal of UK-issued stablecoins.

The committee urged HM Treasury, the Bank of England and the Financial Conduct Authority to maintain existing regulatory timelines while revising reserve and holding requirements so sterling stablecoins can compete effectively with other payment methods rather than being regulated into irrelevance.