LONDON, June 3 (Reuters) – British lawmakers urged the Bank of England on Wednesday to soften planned rules on stablecoins, warning that overly strict requirements could hinder the development of a nascent sterling-backed market.
A cross-party House of Lords committee said the central bank should reconsider proposals to cap the amount of stablecoins held by individuals and businesses and require issuers to back tokens with non-interest-bearing deposits.
Stablecoins are a type of cryptoasset designed to hold a steady value, usually by being pegged to a fiat currency. The market is dominated by U.S. dollar-linked tokens, while sterling-denominated stablecoins represent a tiny fraction of those in use. UK authorities aim to finalise stablecoin rules by the end of the year, broadly in line with the U.S.
“The Bank, [Financial Conduct Authority] and HM Treasury must recognise that the stablecoin market is nascent and growing, and adapt the regulatory regime as the market develops,” the House of Lords Financial Services Regulation Committee said in a report.
The BoE, whose rules will apply to “systemic” stablecoins – those that are widely used for everyday payments – has previously said its protections are necessary to head off a potential flight from bank deposits into stablecoins, which could cause a credit crunch.
Committee chair Sheila Noakes, a Conservative lawmaker, told Reuters she was unconvinced the BoE had taken the right approach to address those concerns. The BoE should be open to “a principles-based, less prescriptive approach,” the committee said.
In a recent speech, BoE Deputy Governor Sarah Breeden hinted that the central bank was reconsidering holding limits. A BoE spokesperson said its final policy and draft rules for systemic stablecoins would be published later in June.
(Reporting by Phoebe SeersEditing by Alexandra Hudson)
