A UK House of Lords committee said the Bank of England (BOE) should reconsider its proposed limits on consumers’ stable coin holdings in a new report.
The cross-party committee on Financial Services Regulation in the second chamber of the UK Parliament also recommended a reconsideration of the requirements for stablecoin issuers to hold at least 40% of the collateral assets in central bank deposits, giving no interest in their “Stablecoins: waiting for Regulation” report published on Wednesday.
Stablecoins are digital tokens that are tied to the value of a traditional financial asset, such as a fiat currency such as the US dollar or the British pound.
As central banks and lawmakers have constructed regulatory frameworks for the use and issuance of stablecoins in recent years, the Bank of England has stood out for proposing what many industry figures considered unnecessarily strict restrictions.
The Bank of England proposed limits of 20,000 pounds ($27,000) per coin for individuals and 10 million pounds ($13.5 million) for companies, which some observers said risked making the country uncompetitive compared to neighboring markets, which would not have such limits.
“Given the early stage of the GBP stablecoin market, rather than preemptively imposing holding limits, the Bank should consider monitoring the growth of the market and only imposing holding limits if the financial stability risks clearly warrant it,” the House of Lords committee said.
The report questioned the asset collateral rules, saying they “could have a significant impact on the business viability of stablecoin issuers in the UK”
For its part, the BOE plans to ease the proposed restrictions, which Sarah Breeden, the deputy governor for financial stability, admitted were “overly conservative” last month.
The BOE is “looking very hard at whether there are different ways we can manage what we think is an important risk when stablecoins come into play,” Breeden said in an interview with the Financial Times.
