The UK ought to press forward with stablecoin regulation however keep away from guidelines that make a pound sterling stablecoin market commercially unworkable, a Home of Lords committee warned in a report launched Wednesday.
The cross-party Monetary Companies Regulation Committee stated the UK was “lagging behind” america and the European Union and that the absence of a transparent regime has “suppressed stablecoin growth and funding within the UK,” regardless of the expansion of world US dollar-pegged tokens comparable to USDt (USDT) and USDC (USDC).
Whereas backing a lot of the Financial institution of England (BoE) and Monetary Conduct Authority’s proposed framework, the committee warned that some measures threat undermining the viability and competitiveness of UK-issued stablecoins.
The report backs necessities for fiat-referenced stablecoins to be backed 1:1 by high-quality property and a proposed BoE backstop lending facility for systemic issuers.
Nevertheless, it singles out a number of parts of the Financial institution’s November 2025 session as probably damaging, warning {that a} requirement for systemic issuers to carry at the least 40% of their backing property in unremunerated central financial institution deposits has attracted “appreciable criticism” and will “affect negatively on the viability of stablecoin issuers and the worldwide competitiveness of the UK market.”
Proposed short-term holding limits for companies and people are additionally flagged as measures that would “unnecessarily inhibit the expansion of GBP stablecoins” and show impractical to implement.
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Curiosity bans and rewards uncertainty cloud UK tokens
Friends additionally flip to the politically delicate query of returns. The Financial institution’s draft regime would prohibit remuneration for coinholders of sterling-denominated systemic stablecoins, placing the UK on an identical footing to the EU’s Markets in Crypto-Belongings Regulation (MiCA), which bars stablecoin issuers from paying curiosity to holders. The US GENIUS Act prohibits fee stablecoin issuers from paying curiosity, although US debate continues over whether or not exchanges and different intermediaries can supply rewards.
Home of Lords Stablecoin Report. Supply: Home of Lords
The committee presents payment-focused stablecoins primarily as devices for quick, low-cost transactions reasonably than as funding merchandise. Nevertheless, it warns that the mix of strict reserve guidelines and a ban on curiosity or different remuneration might weigh on the “enterprise viability” and competitiveness of UK-issued tokens, particularly whereas it stays unclear whether or not card-style rewards or different non-interest incentives can be allowed.
Inquiry proof highlights dangers and UK’s strategic selection
The conclusions comply with months of proof gathering by which the committee pressed business and tutorial witnesses on whether or not stablecoins can transfer a lot past “on and off-ramps into crypto,” challenged them on monetary stability, financial institution funding and shopper safety dangers, and probed sharply divergent views on the US GENIUS Act’s method to non-bank issuers.
Whereas stressing that the enlargement of stablecoin markets “should not create new alternatives for illicit exercise to flourish,” the Lords argue the UK ought to purpose to nurture, not simply police, a pound-denominated stablecoin sector.
They urge His Majesty’s Treasury, the Financial institution of England and the FCA to stay to current timelines, make clear how twin regulation of systemic issuers will work in observe, and recalibrate measures comparable to holding limits and reserve necessities in order that sterling stablecoins can “compete with different types of fee within the UK” reasonably than be regulated out of relevance.
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