A committee of the UK House of Lords said the Bank of England (BOE) should reconsider its proposed limits on consumers’ stablecoin holdings in a new report.
The cross-party Financial Services Regulation Committee of the Second House of the UK Parliament also advised a review of requirements for stablecoin issuers to hold at least 40% of collateral assets in interest-bearing central bank deposits in its report “Stablecoins: Awaiting Regulation” published on Wednesday.
Stablecoins are digital tokens tied to the value of a traditional financial asset, such as a fiat currency like the US dollar or British pound.
As central banks and lawmakers have built regulatory frameworks for the use and issuance of stablecoins in recent years, the Bank of England stood out by proposing what many in the industry saw as unnecessarily harsh restrictions.
The UK’s central bank has proposed limits of 20,000 pounds ($27,000) per coin for individuals and 10 million pounds ($13.5 million) for businesses, which some observers say risks making the country uncompetitive with neighboring markets that would not have such limitations.
“Given the start of the GBP stablecoin market, rather than pre-emptively imposing holding limits, the Bank should consider monitoring market growth and imposing holding limits only if the risks to financial stability clearly justify it,” the House of Lords committee said.
The report questions the asset collateralization rules, saying they “could have a significant impact on the commercial viability of stablecoin issuers in the UK”.
For its part, the BoE plans to ease the proposed restrictions, with Sarah Breeden, deputy governor for financial stability, admitting they were “too conservative” last month.
The BoE is “looking very carefully at whether there are different ways to manage what we think is a significant risk as stablecoins come into play,” Breeden said in an interview with the Financial Times.
