The House of Lords has called on the Bank of England to accelerate stablecoin regulation, stating the UK risks losing a key opportunity without swift action.
Lords push for clearer rules
The Lords Financial Services Regulation Committee criticized the Bank of England’s proposed stablecoin safeguards as too restrictive. Concerns included a requirement that 40% of backing assets be held in non-interest-bearing central bank deposits, a £20,000 individual holding limit per coin, and a £10 million cap for businesses. The committee also opposed restrictions on commercial banks issuing stablecoins.
The UK has fallen behind other jurisdictions, though the central bank is moving in the right direction. The intervention highlights the market potential and the need for clear rules.
Global momentum accelerates
Europe’s Markets in Crypto-Assets (MiCA) regulation takes full effect on July 1, requiring crypto firms to secure full authorization or exit the market. Of the 1,200 firms with legacy national registrations, only about 210 have completed the transition. Those that have, including payment platforms with stablecoin capabilities, now hold a competitive advantage, gaining access to all 30 European Economic Area states under a single license.
In the U.S., the GENIUS Act and the pending CLARITY Act have redefined stablecoins as recognized payments infrastructure. Japan, where cash remains dominant, sees three major banks—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group—planning to jointly issue stablecoins within the year. Their participation reflects growing mainstream acceptance, even in conservative markets.
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This shift creates an opening for the UK. Sterling-denominated stablecoins account for less than 0.5% of the $320 billion stablecoin market, which remains overwhelmingly dollar-backed. The gap exists because no credible framework for sterling stablecoins exists yet. If regulators act decisively, the country could strengthen its fintech sector and position itself as a leader in digital payments rather than following rules set elsewhere.
A realistic scenario sees sterling stablecoins becoming a viable alternative to dollar dominance. If the Bank of England matches the urgency urged by the Lords, the UK could shape the future of cross-border payments instead of reacting to others’ decisions.
Stablecoins address real inefficiencies
Payroll adoption is growing. Traditional systems work for domestic employees but struggle with contractors across borders, irregular schedules, and multiple currencies. Stablecoin payroll eliminates banks and intermediaries, delivering faster access to earnings for workers and reducing manual processes for employers.
The Bank of England may revisit the 40% reserve requirement and consumer holding caps. While this is progress, the Lords’ message remains clear: delay could cost the UK its leadership position.
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