UK lawmakers are pressing the Bank of England to soften stablecoin rules, a move that could reshape oversight, innovation, and crypto market activity in the UK.
A House of Lords committee has urged the Bank of England to soften its proposed stablecoin regulations, warning that overly strict rules could stifle the growth of sterling-denominated stablecoins before the market has a chance to develop.
The Financial Services Regulation Committee published its report, “Stablecoins: waiting for regulation,” on June 3, 2026. The committee challenged two central pillars of the Bank of England’s November 2025 consultation: the proposed reserve composition requirements and temporary holding limits for systemic stablecoins.
What to Know
- UK lawmakers say the Bank of England’s proposed 40% reserve requirement and holding caps for systemic stablecoins need to be reconsidered.
- The GBP stablecoin market currently stands at roughly £12 million, making the rules preemptive rather than responsive to systemic risk.
What UK Lawmakers Are Asking the Bank of England to Change
The committee’s core concern targets the BoE’s proposal that systemic stablecoin issuers hold at least 40% of backing assets as unremunerated deposits at the central bank, with up to 60% in short-term UK government debt. The report states this requirement “needs further consideration,” arguing it could make GBP stablecoins uneconomical to issue.
Lawmakers also pushed back on proposed temporary holding limits of £20,000 per coin for individuals and £10 million for businesses. The committee said these caps should be reconsidered because they could inhibit GBP stablecoin adoption and would be impractical to enforce.
Baroness Noakes, who chairs the committee, framed the urgency in competitive terms.
“The UK is lagging behind compared with the US and the EU but is now moving in the right direction.”
— Baroness Noakes, Chair, Financial Services Regulation Committee
Why the Current Stablecoin Rules Are Facing Pushback
The BoE launched its consultation on regulating systemic stablecoins in November 2025, closing submissions in February 2026. Sarah Breeden, the Bank’s Deputy Governor for Financial Stability, said at the time that the proposals were “fit for a future where stablecoins play a meaningful role in payments.”
The committee acknowledges the Bank’s financial stability mandate but argues regulators must recognise that the stablecoin market remains nascent. HM Treasury’s own written evidence to the committee puts the total GBP stablecoin market at approximately £12 million ($16 million), a figure that underscores how small the sector is relative to the proposed regulatory apparatus.
That same evidence revealed that 20 firms applied to the FCA’s stablecoin sandbox cohort, with only four selected. The committee noted this demonstrates genuine industry interest but also a regulatory bottleneck that risks pushing innovation overseas, a pattern already visible in how UK regulators have approached crypto sponsorships in other sectors.
Under the UK’s framework, non-systemic stablecoins fall under FCA oversight, while HM Treasury can designate a stablecoin as systemic, triggering a dual-regulation model. The Bank of England would then oversee prudential and financial-stability risks, adding a layer of compliance that the committee fears may deter issuers from launching GBP-denominated products.
What Easier Stablecoin Rules Could Mean for the UK Crypto Sector
If the Bank of England softens the reserve and holding-limit requirements, it could open the door for more firms to issue GBP stablecoins and expand their use in payments. The current £12 million market cap suggests the UK has barely entered the stablecoin race; a lighter regime could accelerate that significantly.
Reuters reported on June 3 that a Bank of England spokesperson confirmed draft rules would be published later in June, suggesting the committee’s recommendations arrived at a critical moment in the rulemaking timeline. The committee explicitly called on regulators to adapt the regime as the market develops rather than locking in restrictive parameters now.
The broader crypto market context adds another dimension. The Fear & Greed Index currently reads 12, deep in “Extreme Fear” territory, while the global stablecoin market, dominated by dollar-denominated tokens like Tether with a market cap of roughly $187 billion, continues to dwarf any sterling alternative.
For crypto firms weighing whether to base stablecoin operations in the UK, the outcome of this regulatory debate matters. As cases like recent high-profile crypto fraud prosecutions and the growing visibility of long-held digital assets demonstrate, the UK is actively grappling with how to regulate a maturing but still volatile digital asset sector.
The Bank of England’s draft rules, expected later this month, will reveal whether the central bank is willing to recalibrate its approach in line with the committee’s recommendations.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
