The UK’s House of Lords has been conducting an inquiry that is reviewing regulatory proposals for UK stablecoins and today the Financial Services Regulation Committee published a report recommending a lighter touch on several fronts. It welcomed the Bank of England’s proposed backstop lending facility for systemic stablecoins, but made three priority suggestions. They believe the requirement that systemic stablecoins park 40% of reserves at the central bank is overly onerous, and deeper in the report suggest remunerating central bank deposits. The Lords urged the regulators to reconsider speedy redemption directly from the issuer. Nor does it support the temporary holding limit proposals for systemic stablecoins, which notably had a mixed response from the banks it aims to protect (more later).
Additionally, the report repeatedly suggested that regulations remain flexible for an evolving stablecoin market, and at the same time provide clarity, such as around when a stablecoin becomes a systemic one and the transition measures. Most stablecoins are regulated by the Financial Conduct Authority (FCA), but systemic ones are jointly regulated by the Bank of England. On the clarity front they also believe HM Treasury needs to outline its plans to bring stablecoins into the payments perimeter, including which types it will apply to. The Lords also view the UK as behind other countries, so urged regulators to stick to their deadlines which involve stablecoin issuer applications starting later this year.
Beyond these top level suggestions, it made numerous others, including levelling the playing field for bank issuers by allowing them to issue stablecoins from the same entity and without using separate branding.
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