The UK risks missing out on the $310bn stablecoin market due to excessive regulation, according to a House of Lords inquiry published Wednesday. Less than 0.5% of stablecoins are in pound sterling, with the market dominated by US dollar coins from Tether and Circle. Regulatory uncertainty has prevented GBP stablecoins from developing.

The House of Lords criticized the UK's approach, which creates two distinct regulatory regimes unlike other countries. The Bank of England proposes ownership limits of £20,000 for individuals and £10 million for businesses, while restricting commercial banks from launching stablecoins. The Lords say these rules make the UK unattractive compared to international jurisdictions.

Signs indicate regulators may soften their stance, with BoE deputy governor Sarah Breeden calling their approach potentially "overly conservative." The UK needs to balance preventing illicit use with allowing innovation, as its position as a global financial center should embrace stablecoins for more efficient cross-border payments and new business opportunities.