A UK parliamentary committee has issued a stark warning about the country's position in the global stablecoin market, emphasizing that strict regulatory rules could stifle sterling-pegged crypto growth. According to the latest House of Lords Financial Services Regulation Committee report published on June 3, the UK risks falling behind global peers such as the United States and the European Union if its regulatory framework for stablecoins remains too restrictive. The committee warned that the current regulatory gap leaves the UK behind the US and EU, effectively freezing domestic stablecoin funding while dollar-pegged options boom internationally. Committee chair Sheila Noakes commented that the UK is lagging behind compared with the US and the EU, but is now moving in the right direction, urging authorities to "get it right."
The committee highlighted significant concerns from industry participants about the current regulatory environment and its impact on UK competitiveness. As reported in the latest committee findings, unclear rules and delayed implementation timelines are discouraging investment in pound-backed stablecoins and related financial products. The report noted that lawmakers say uncertainty is slowing UK stablecoin growth, despite the country having an opportunity to play a larger role in digital finance infrastructure. The committee argued that regulatory frameworks should balance financial stability concerns with the need to support innovation and competitiveness, particularly as the stablecoin market remains nascent and growing globally. The committee's latest report turns this technical debate into a test of whether the UK can build a pound-denominated stablecoin market without making it uneconomic from the start.
Parts of the Bank of England's proposed stablecoin framework received particular scrutiny in the committee's latest report, with specific criticism of restrictive proposals. The committee highlighted concerns around proposals requiring systemic stablecoin issuers to hold 40% of backing assets in non-interest-bearing central bank deposits, arguing that such requirements could make UK-issued stablecoins commercially unattractive compared with products launched in other jurisdictions. The committee also criticized temporary limits on stablecoin holdings, warning they may stifle innovation in the GBP stablecoin market and be hard to enforce. The committee recommended that the central bank drop its planned caps on user wallets and stop requiring issuers to hold zero-interest deposits, calling for a "principles-based, less prescriptive approach." The Bank's November 2025 consultation proposed a split backing model for systemic sterling stablecoins, with at least 40% of backing assets as deposits at the Bank of England and up to 60% in short-term sterling-denominated UK government debt.
The committee's latest findings confirm that the global stablecoin market remains heavily dominated by U.S. dollar-backed tokens such as USDT and USDC, while pound-backed alternatives remain comparatively limited. As reported in the latest committee report, the global stablecoin market was estimated at more than $310 billion in 2026, overwhelmingly dominated by US dollar stablecoins and two issuers, Tether and Circle. For the UK, that creates a strategic problem as a sterling stablecoin market could support cross-border payments, tokenized settlement, programmable payments, and competition in payments. The committee says the UK is already lagging the US and EU in developing a stablecoin regime, though it says the country is now moving in the right direction. The committee cautioned that falling behind on regulation could leave British challenger banks and small businesses excluded from a rapidly developing global payments network.
The House of Lords committee emphasized the urgency of implementing stablecoin regulations, calling on regulators to stick to their timeline and avoid delays. According to the latest report, authorities are working toward finalizing stablecoin regulations before the end of the year, with rules expected to align closely with those in the United States. The Bank of England is expected to publish its final draft rules for systemic stablecoins later this month, with a BoE spokesperson confirming that final policy and draft rules would be published later in June. Committee member Sarah Breeden, the Bank's deputy governor for financial stability, told the committee in March that the Bank expected draft rules in the middle of 2026, final rules by year-end, and applications from stablecoin issuers by the end of the year. The committee encouraged a "use-case agnostic" framework that protects consumers and financial stability while allowing different stablecoin applications to develop naturally, while peers cautioned regulators against treating stablecoins as inherently riskier than current payment methods.
