UK House of Lords Presses Coinbase Executive on Stablecoin Rules, KYC and Bank-Run Risks

The UK is developing a regulatory regime for systemic stablecoins, with the Bank of England overseeing issuers that have a significant role in payments. The House of Lords Financial Services Regulation Committee supports establishing rules but says the UK is already behind the United States and European Union. It warned that excessive compliance costs would weaken sterling stablecoins’ competitiveness in development, investment and cross-border payments.

The committee’s latest report warned that the BoE’s proposed framework could make sterling stablecoins “commercially unviable.” It specifically questioned proposed holding limits of £20,000 for individuals and £10 million for businesses, as well as restrictions on issuers earning returns from reserve assets. The report called on regulators to present stronger evidence before the regime formally takes effect and to balance financial stability with market innovation.

The Bank of England has defined stablecoins as a “new form of money” that can be used for payments and settlement. The move signals a policy shift from guarding against crypto-asset risks to establishing rules for issuance, reserves and redemption. It has implications for the sterling payment system and the development of tokenized deposits, while giving banks and fintech companies clearer market direction.

By the end of 2024, the BoE plans to begin accepting regulatory applications for “systemic stablecoins” that could be widely used for payments. The Financial Conduct Authority is also supporting sterling stablecoins that meet standards for reserves, redemption and consumer protection. Digital bank Revolut, which already offers crypto-asset services, could be among the first applicants or issuers.