UK Parliament Financial Services Regulation Committee publishes stablecoin report urging faster rules and revisions to proposed UK regime

The UK Parliament Financial Services Regulation Committee has published a report on the growth and proposed regulation of stablecoins in the UK, concluding that the UK is lagging the United States and European Union and should not delay finalising its regime. The committee broadly supports the direction of the Bank of England and Financial Conduct Authority proposals, but says parts of the framework should be reconsidered because they diverge from international approaches and will influence how any UK stablecoin market develops. The report highlights three areas in particular: requiring systemic issuers to hold unremunerated backing assets, proposed stablecoin holding limits, and restrictions on commercial banks issuing stablecoins. It asks the Bank of England to carry out more granular modelling of the effect of holding limits on high-value use cases, calls on HM Treasury to provide more detail on how it will determine whether stablecoins are systemic, and says HM Treasury, the Bank of England and the Financial Conduct Authority should assess whether current laws are sufficient to detect and deter illicit activity using private unhosted and unregulated wallets and be prepared to legislate to restrict their use if necessary. The committee also recommends that the Financial Conduct Authority reconsider whether a k-factor requirement that increases with the volume of stablecoins is appropriate.