UK House of Lords Criticizes Proposed Stablecoin Rules, Cites 40% Reserve Requirement Impact

According to the UK House of Lords Financial Services Committee, the regulator released a 71-page report criticizing the Bank of England and Financial Conduct Authority's proposed stablecoin framework for lacking international competitiveness. The Bank of England's requirement that systemic stablecoin issuers hold at least 40% reserves in non-interest-bearing central bank deposits is seen as damaging to issuer profitability and UK market competitiveness. Proposed holding caps of £20,000 for individuals and £10 million for businesses are considered operationally challenging and potentially restrictive to sterling stablecoin adoption.

The committee also highlighted concerns over T+1 redemption requirements and restrictions on deposit institutions issuing stablecoins under independent brands. The committee called on regulators to maintain the regulatory framework implementation deadline of October 25, 2027, and adopt a principles-based, technology-neutral approach to balance financial stability with market innovation.