British lawmakers are stepping up pressure on the Bank of England (BOE) to soften planned rules for stablecoins, warning that strict limits could slow the growth of the UK’s emerging digital currency market.
A cross-party House of Lords Financial Services and Regulation Committee formally called on the BoE, the Financial Conduct Authority (FCA), and HM Treasury to adjust their restrictive policy proposals. The lawmakers said several proposals, including limits on how much individuals and firms can hold, could hold back innovation in a still-developing sector.
The committee also raised concerns about plans requiring issuers to fully back stablecoins with non-interest-bearing deposits, arguing that the market remains too small and early-stage to support such strict requirements.
Lawmakers challenge central bank approach
The Financial Services Regulation Committee said regulators should adjust their policies as the sector develops. “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 committee said.
Sterling-backed stablecoins still account for a small share of global usage, while dollar-linked tokens dominate international crypto payments. UK authorities are still aiming to finalise rules this year and align them with developments in the United States.
Committee Chair Sheila Noakes said she was not convinced by the Bank of England’s current approach. The committee called instead for a “principles-based, less prescriptive approach” to regulation.
Bank signals openness to change
The Bank of England defended its proposed stablecoin rules, saying the measures are needed to protect financial stability. Officials have warned that a large shift of money from bank deposits into stablecoins could reduce lending capacity and tighten credit conditions in the economy.
However, regulators appear to be reconsidering parts of the framework after feedback from the industry. At City Week 2026 in London, Deputy Governor Sarah Breeden acknowledged concerns that some proposals may be too strict. “We are keen to create a regime where stablecoins can succeed and can deliver benefits to users,” Breeden said. “But it is money, and we want to make sure that this new form of money is safe.”
UK advances tokenized finance plans
The Bank of England has also backed wider efforts to develop tokenized financial markets alongside stablecoins. Deputy Governor Sarah Breeden said tokenized systems could improve payment efficiency and reduce settlement delays through automation.
The Financial Conduct Authority and the Bank of England recently published a joint framework for tokenized wholesale markets. The regulators have also opened a consultation and invited industry feedback until July 3, 2026. This happens as UK policymakers continue to explore ways to support digital finance while maintaining oversight of financial stability as tokenized assets expand in global markets.
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