UK lawmakers urge Bank of England to rethink proposed stablecoin limits

A committee in the UK House of Lords has called on the Bank of England to reconsider parts of its proposed stablecoin regime, arguing that some of the central bank’s safeguards may be too restrictive for a market that is still at an early stage. In a new parliamentary report on stablecoin regulation, the cross-party Financial Services Regulation Committee said the Bank should take a more measured approach to consumer holding limits and reserve requirements rather than locking in hard constraints before the market has meaningfully developed. The intervention is notable because it comes from lawmakers reviewing whether the UK’s regulatory posture is striking the right balance between resilience and competitiveness.

At the center of the committee’s criticism are the Bank of England’s proposed limits of 20,000 pounds per coin for individuals and 10 million pounds for businesses. According to the report, those caps risk constraining adoption before the scale of any financial stability threat is clear. The committee said that, given the early stage of the pound-denominated stablecoin market, the Bank should monitor growth and impose holding limits only if risks clearly warrant that step. That framing does not reject oversight; instead, it argues for sequencing regulation around observed risk rather than pre-emptive hard limits that could deter issuance, usage and infrastructure investment.

The committee also raised concerns about the economics of the proposed reserve framework. One feature that drew particular scrutiny was the expectation that stablecoin issuers hold at least 40% of backing assets in central bank deposits that do not earn interest. The report said those rules could have a significant effect on the business viability of issuers operating in the UK. For stablecoin providers, reserve construction is not just a prudential issue but the core of the product model, because liquidity, redemption confidence and economics all depend on how backing assets are structured. Lawmakers are effectively warning that an overly conservative regime could make the UK a difficult place to build licensed stablecoin businesses.

The broader policy question is familiar across major jurisdictions: how to regulate digital cash instruments that promise stability without importing the same fragilities regulators worry about in banking and money markets. Stablecoins are designed to maintain a fixed value against assets such as the US dollar or pound sterling, but confidence in that peg depends on reserves, redemption mechanisms and legal clarity. In recent years, regulators in the UK, EU and US have moved toward frameworks that emphasize backing quality, liquidity and operational controls. The House of Lords report suggests the UK should still pursue those goals, but with more flexibility on calibration so it does not end up as an outlier relative to neighboring markets.

That competitiveness point matters because stablecoin issuance increasingly sits at the intersection of payments, tokenized cash management and onchain settlement infrastructure. If reserve rules make issuance uneconomic or holding caps reduce practical utility, firms may choose to launch products elsewhere and serve UK-related activity from other jurisdictions. Lawmakers appear concerned that this outcome would leave the UK with the costs of caution but fewer of the benefits associated with digital payments innovation. The committee’s message is that prudential policy should be credible, but also proportionate to the current size and maturity of the market.

The report does not settle the debate, and the Bank of England may still conclude that its proposed restrictions are necessary to prevent future systemic risks. But the parliamentary pushback makes clear that stablecoin regulation in the UK is moving into a more contested phase, where the exact design of holding limits and reserves could shape whether the country becomes a serious venue for regulated onchain money. For market participants, the immediate takeaway is that the UK framework is still being negotiated, and that policymakers are under pressure to prove they can guard financial stability without closing the door on responsible stablecoin growth.