A U.K. House of Lords committee said the Bank of England (BOE) should reconsider its proposed limits on consumer stablecoin holdings in a new report.
The cross-party Financial Services Regulation Committee of the U.K. Parliament’s second chamber also advised reconsideration of requirements for stablecoin issuers to hold at least 40% of backing assets in central bank deposits yielding no interest in its “Stablecoins: waiting for regulation” report published Wednesday.
Stablecoins are digital tokens pegged to the value of a traditional financial asset, such as a fiat currency like the U.S. dollar or the pound sterling.
As central banks and lawmakers have constructed regulatory frameworks for the use and issuance of stablecoins in recent years, the Bank of England has stood out for proposing what many industry figures deemed unnecessarily stern restrictions.
The U.K.’s central bank proposed limits of 20,000 pounds ($27,000) per coin for individuals and 10 million pounds ($13.5 million) for businesses, which some observers said risked making the country uncompetitive compared to neighboring markets which would have no such limitations.
“Given the early stage of the GBP stablecoin market, 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 House of Lords committee said.
The report questioned the rules on backing assets, saying they “could have a significant impact on the business viability of stablecoin issuers in the U.K.”
For its part, the BOE is planning to ease the proposed restrictions, with Sarah Breeden, deputy governor for financial stability, admitting they were “overly conservative,” last month.
The BOE 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,” Breeden said in an interview with the Financial Times.