House of Lords warns UK risks losing ground in stablecoin race

A UK parliamentary committee has warned that Britain risks losing ground in the global stablecoin market unless regulators provide clearer and more commercially viable rules for digital asset issuers. In a new report, the House of Lords Financial Services Regulation Committee said regulatory uncertainty and restrictive proposals could push stablecoin innovation toward jurisdictions such as the United States and the European Union, where frameworks are advancing more rapidly. Lawmakers say uncertainty is slowing UK stablecoin growth The committee argued that the UK has an opportunity to play a larger role in digital finance infrastructure. However, they warn of risks of falling behind if firms continue to face prolonged uncertainty around stablecoin regulation. The report said industry participants raised concerns that unclear rules and delayed implementation timelines are discouraging investment in pound-backed stablecoins and related financial products. The committee said regulatory frameworks should balance financial stability concerns with the need to support innovation and competitiveness. Bank of England proposals draw criticism Parts of the Bank of England's proposed stablecoin framework received particular scrutiny in the report. The committee highlighted concerns around proposals requiring systemic stablecoin issuers to hold 40% of backing assets in non-interest-bearing central bank deposits. The report warned that such requirements could make UK-issued stablecoins commercially unattractive compared with products launched in other jurisdictions. The committee said regulators should ensure that safeguards designed to protect financial stability do not unintentionally suppress the development of a domestic stablecoin market. Dollar-backed stablecoins continue to dominate The report also noted 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. Lawmakers warned that without a competitive domestic framework, the UK could become increasingly dependent on foreign-issued digital currencies for future payment infrastructure. That concern arrives as governments and regulators worldwide accelerate efforts to establish rules around stablecoins, tokenized assets, and digital settlement systems. Pressure grows as U.S. and EU move ahead The committee's warning comes amid growing momentum for stablecoin regulation globally. In the United States, lawmakers continue advancing stablecoin-focused legislation such as the GENIUS Act. At the same time, the European Union has already begun implementing its Markets in Crypto-Assets [MiCA] framework. The House of Lords committee said the UK must move quickly if it wants to remain competitive in the evolving digital finance landscape. Final Summary A House of Lords committee warned the UK risks losing ground in the global stablecoin market due to regulatory uncertainty and restrictive proposals. Lawmakers criticized parts of the Bank of England's proposed framework, arguing some rules could make UK-issued stablecoins less competitive.