Holding limits and deposit requirements could chill UK pound stablecoin market, committee warns
The House of Lords Financial Services Regulation Committee has told the Bank of England to reconsider its proposed safeguards for sterling stablecoins before finalizing UK rules, warning that strict caps on individual holdings and high central-bank deposit requirements could make regulated pound stablecoins unviable.
In a report published June 3, 2025, the committee flagged the Bank’s proposed per-coin holding limits of £20,000 for individuals and £10 million for businesses, along with a 40% unremunerated central-bank deposit requirement, as potential obstacles to issuer profitability and UK competitiveness.
“If a pound stablecoin cannot be held in useful amounts or generate enough reserve income to support the issuer’s business, the UK could end up with clear rules, but few firms willing to build the products those rules are meant to govern,” the committee stated in its report.
The Bank of England proposed the split backing model in a November 2025 consultation. Under that framework, 40% of backing assets would be held as deposits at the Bank to ensure immediate liquidity for large redemptions, while 60% could be invested in short-term sterling-denominated UK government debt. The committee acknowledged the Bank’s concern: banks currently provide approximately 85% of household credit in the UK, compared with 30% to 40% in the US. Rapid stablecoin adoption could accelerate deposit flight from the traditional banking system faster than banks and funding markets could absorb.
However, the Lords panel recommended the Bank should monitor stablecoin growth and impose holding limits only if financial stability risks demonstrably warrant them, signaling skepticism of the Bank’s precautionary approach. The committee emphasized that remuneration and liquidity requirements for backing assets could significantly influence issuer viability and the UK’s ability to compete in the global stablecoin market, estimated at over $310 billion in 2026 and dominated by US dollar stablecoins from Tether and Circle.
The UK stablecoin market remains nascent. Revolut, a fintech firm, has been conducting a pound stablecoin trial. The Bank of England’s Deputy Governor for Financial Stability, Sarah Breeden, gave oral evidence to the committee in March 2026 and indicated the Bank expected to publish draft rules in mid-2026, with finalized rules and issuer applications expected by end of 2026.
Regulatory clarity on the boundary between systemic and non-systemic stablecoins remains a flashpoint. The Bank of England regulates systemic stablecoins, while the FCA oversees non-systemic ones, but the transition between regimes is unclear for issuers. The committee’s intervention suggests the Bank may face pressure to loosen safeguards that, if too restrictive, could push market activity toward offshore, dollar-denominated, or unregulated alternatives.
The Bank has not yet publicly responded to the Lords committee’s recommendations or signaled willingness to revise its proposed safeguards.
