House of Lords Committee report urges action following stablecoin inquiry

The House of Lords (Financial Services Regulation) Committee has published a report following its inquiry into the growth and proposed regulation of stablecoins in the UK. Among other things, the report examines the Bank of England (BoE) and UK Financial Conduct Authority's (FCA) proposed regulatory regimes for systemic and non systemic stablecoins and assesses whether they are measured and proportionate. The Committee finds that the UK is lagging behind the U.S. and EU in developing its regulatory framework and urges regulators to adhere to existing timelines to avoid delay.

While broadly supportive of the proposals, the report highlights aspects which require re-consideration. It notes there are several elements which diverge from international approaches, particularly proposals relating to unremunerated backing assets requirements, the stablecoin holding limits and the restrictions on commercial bank issuance. The report calls for: further BoE analysis on the impact of holding limits on high-value cases; greater clarity from HM Treasury (HMT) on how it will determine whether stablecoins are systemic; and re-consideration by the FCA of the proposed k-factor requirement for stablecoin issuers. It also notes HMT's intention to bring stablecoins into the payments regulatory perimeter but highlights the lack of detail on scope.

The Committee further calls on HMT and the UK regulators to assess whether existing legal frameworks adequately address risks from unhosted and unregulated wallets, and to be prepared to legislate where necessary. It urges the government and UK regulators to consider its recommendations on how the proposed regulations may need to be re-adjusted to bring certainty and confidence.

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