Bank of England faces lawmaker calls to ease stablecoin plans

British lawmakers are pressing the Bank of England to ease its planned regulations for stablecoins, warning that overly stringent rules could impede the development of a nascent market for sterling-backed digital assets.

A cross-party committee in the House of Lords has advised the central bank to reconsider proposals that would cap stablecoin holdings for individuals and businesses. The committee also suggested the bank rethink requirements for issuers to back tokens with non-interest-bearing deposits.

Stablecoins, a type of cryptoasset, are designed to maintain a stable value, typically by being pegged to a fiat currency. While U.S. dollar-linked tokens dominate the global market, sterling-denominated stablecoins represent a minimal share. UK authorities intend to have stablecoin regulations in place by the end of the year, largely mirroring U.S. policies.

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The Bank, [Financial Conduct Authority] and HM Treasury must recognise that the stablecoin market is nascent and growing, and adapt the regulatory regime as the market develops.

The House of Lords Financial Services Regulation Committee stated in a report that "the Bank, [Financial Conduct Authority] and HM Treasury must recognise that the stablecoin market is nascent and growing, and adapt the regulatory regime as the market develops." The Bank of England, which will apply rules to "systemic" stablecoins used for everyday payments, has previously cited concerns about potential bank deposit flight into stablecoins, which could trigger a credit crunch.

Committee chair Sheila Noakes expressed skepticism about the Bank's approach, suggesting it should adopt a "principles-based, less prescriptive approach." The Bank of England is expected to publish its final policy and draft rules for systemic stablecoins later in June, with Deputy Governor Sarah Breeden hinting at a reconsideration of holding limits.

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a principles-based, less prescriptive approach