The UK House of Lords Financial Services Regulation Committee has told the Bank of England to go back to the drawing board on key parts of its proposed stablecoin rules. In a report published this week, the committee warned that the current blueprint would create heavy operational burdens for issuers and could leave Britain trailing global rivals with more advanced regimes.
The committee's core criticism
The panel supports some of the BoE's ideas — mandatory 1:1 backing for tokens and a backstop lending facility get a thumbs-up. But it takes serious issue with two specific requirements. The central bank wants systemic stablecoin issuers to park at least 40% of their reserves as unremunerated bank deposits, a move meant to ensure robust redemption and public confidence. The committee calls that requirement costly and potentially unsustainable for businesses.
It also takes aim at proposed holding limits: £10,000 to £20,000 for individual users and £10 million for businesses. Lawmakers argue those caps would stifle the growth of pound-backed stablecoins and be nearly impossible to enforce in practice.
What the BoE said — and is saying now
In December, a cross-party group of MPs and peers sent a letter to Chancellor Rachel Reeves opposing the rules. The tone from Threadneedle Street has since softened. Sarah Breeden, the BoE deputy governor for financial stability, acknowledged in January that the proposals may have been “overly conservative” and said the central bank was preparing to ease its regulatory plans. A BoE spokesperson confirmed that final policy and draft rules are due out later this month.
The regulatory handoff nobody can explain
Beyond the numbers, the committee flagged confusion over how stablecoins would move from the Financial Conduct Authority's oversight to a joint regime with the Bank of England. It also noted that the Treasury has yet to clarify whether it will bring stablecoins into the formal payments regulatory perimeter. Without a clear timeline and a flexible approach, the report argues, the UK risks ceding ground to jurisdictions that have already locked in their rules.
The central bank now has to decide how far it bends. With the final policy due in weeks, the question isn't whether the BoE will water down its plan — it's how much. The Lords have made their position clear; the industry will be watching what lands in the official draft.
