Union

Bank

Test

Rewards

<p><em>This article was updated with comments from Katie Harries, Head of Policy for Europe at Coinbase.</em></p>
<p>UK Lords warn strict BoE stablecoin rules could make pound-backed tokens hard to scale, even as lawmakers back a clear UK regime.</p>
<div id="cn-block-summary-block_f236d42b3de13d590507a60b8634dc0c" class="cn-block-summary">
 <div class="cn-block-summary__nav tabs"><span>Summary</span>
 </div>
 <div class="cn-block-summary__content">
  <ul>
   <li>UK Lords backed stablecoin rules but warned BoE holding caps could slow pound token adoption.</li>
   <li>BoE’s 40% unremunerated reserve plan drew concern over issuer viability and UK market competitiveness risks.</li>
   <li>Peers urged faster clarity as UK stablecoin rules continue trailing US and EU frameworks abroad.</li>
  </ul>
 </div>
</div>
<p>A House of Lords committee has <a href="https://www.bankofengland.co.uk/news/2025/november/boe-launches-consultation-on-regulating-systemic-stablecoins" rel="noopener noreferrer nofollow">warned</a> that the Bank of England’s planned stablecoin rules may make a pound sterling token market commercially weak before it grows. The Financial Services Regulation Committee said the UK needs clear rules, but those rules should not stop viable issuers from entering the market.</p>
<p>The report said the UK is “lagging behind” the United States and the European Union in stablecoin regulation. It also said the lack of a clear regime has slowed UK stablecoin investment, while dollar-backed tokens such as USDT and USDC dominate global use.</p>
<p>The committee backed the main safety goal of requiring fiat-backed <a href="https://crypto.news/bank-of-england-says-tokenized-deposits-and-stablecoins-belong-in-uk-payments/" rel="noopener noreferrer nofollow">stablecoins</a> to hold assets equal to the value of tokens in circulation. It also supported a Bank of England backstop lending facility for systemic issuers, saying the measure could support confidence during stress.</p>
<p>You might also like: <a href="https://crypto.news/cardano-analytics-platform-taptools-to-shut-down-after-4-years/" rel="noopener noreferrer nofollow"> Cardano analytics platform TapTools to shut down after 4 years </a></p>
<p>However, peers questioned the Bank’s proposal that systemic issuers hold at least 40% of backing assets in unremunerated central bank deposits. The report said the rule had drawn “considerable criticism” because it could hurt issuer viability and weaken the UK’s ability to compete.</p>
<h2 class="wp-block-heading" id="strong-holding-limits-could-slow-pound-tokens-strong"><strong>Holding Limits Could Slow Pound Tokens</strong></h2>
<p>The Bank has also proposed temporary holding limits of £20,000 for individuals and £10 million for businesses. It says the caps would reduce the risk of sharp deposit outflows from banks if stablecoins become widely used for payments.</p>
<p>The committee said those limits could “unnecessarily inhibit the growth of GBP stablecoins” and create practical problems for firms. It urged the Bank to monitor the market first and apply caps only if financial stability risks clearly justify them.</p>
<h2 class="wp-block-heading" id="strong-rewards-debate-adds-commercial-doubt-strong"><strong>Rewards Debate Adds Commercial Doubt</strong></h2>
<p>The report also raised questions over interest and rewards. Under the current proposals, stablecoin issuers would not be allowed to pass interest from backing assets to token holders. Regulators have not yet decided whether card-style rewards or other user incentives will be allowed.</p>
<p>That issue matters because pound stablecoins must compete with cards, bank payments, dollar tokens and tokenized deposits. The committee said any ban on rewards should come with clear risk-based reasons, especially if similar rewards remain available in traditional payment systems.</p>
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
 <p>“The Bank of England is currently proposing rules that would place more severe limitations on stablecoins than any other jurisdiction. Today’s Lords report points this out, and rightly so. Regulation must be proportionate, evidence-based and designed to address actual risks rather than hypothetical future scenarios, as is currently the case.</p>
 <p>The Bank is publishing draft rules later this month and it’s so important that these rules allow stablecoins to compete on a level playing field with other forms of digital money. The UK needs GBP stablecoins to grow and operate at scale — the UK’s rules must not cap their future before they are even off the ground.”</p>
 <p>– Katie Harries, Head of Policy for Europe at Coinbase.</p>
</blockquote>
<h2 class="wp-block-heading" id="strong-uk-regulators-face-a-timing-test-strong"><strong>UK Regulators Face A Timing Test</strong></h2>
<p>The warning comes as the UK tries to <a href="https://crypto.news/uk-lays-unified-rails-for-stablecoins-and-tokenized-deposits/" rel="noopener noreferrer nofollow">bring</a> stablecoins, tokenized deposits and wider crypto activity into formal financial rules. Recent policy work places stablecoins inside the payments system, while the FCA’s wider crypto regime is scheduled to switch on in 2027.</p>
<p>The committee urged HM Treasury, the Bank and the FCA to <a href="https://crypto.news/uks-fca-opens-final-crypto-consultation-ahead-of-2027-regime-switch-on/" rel="noopener noreferrer nofollow">keep</a> their timelines and explain how dual regulation will work for systemic issuers. It said regulation should support safety while leaving enough room for a sterling stablecoin market to develop.</p>
<p>Read more: <a href="https://crypto.news/democrats-push-labor-department-to-scrap-crypto-401k-proposal/" rel="noopener noreferrer nofollow"> Democrats push Labor Department to scrap crypto 401(k) proposal </a></p>

UK Lords warn BoE could kill pound stablecoins before they scale in Britain

Table of Contents

crypto.news

Other articles published on Jun 3, 2026

Join our free newsletter for daily crypto updates!