Bank of England Rethinks Stablecoin Rules After Industry Pushback

TLDR

• BOE rethinks stablecoin caps after industry warns of weak UK adoption
• BOE may soften stablecoin reserve rules to support UK token growth
• UK stablecoin rules face review as firms push back on strict caps
• BOE weighs stablecoin rule changes while keeping financial safety in focus
• Stablecoin issuers press BOE to ease limits and protect UK competitiveness

The BOE may soften planned stablecoin rules after digital asset firms warned that strict caps could weaken UK adoption. The review targets proposed holding limits and reserve rules for pound-backed tokens. However, the central bank still wants safe digital money before wider use begins.

BOE Reviews Stablecoin Holding Limits

The BOE had proposed temporary limits on sterling stablecoin holdings for individuals and businesses. Individuals would hold up to £20,000 per coin under the plan. Businesses would face a limit of up to £10 million per coin.

The central bank designed the caps to reduce pressure on commercial bank deposits. It feared rapid movement from bank accounts into tokenised money during early adoption. Therefore, the BOE treated stablecoins as a financial stability issue.

Digital asset firms pushed back because the limits may create operational problems. They argued that platforms may struggle to track holdings across wallets and services. Moreover, businesses may avoid UK stablecoins if caps restrict treasury and settlement use.

Reserve Rules Face Fresh Review

The BOE also plans to review its proposed reserve requirement for UK stablecoin issuers. The plan required issuers to hold at least 40% of backing assets at the central bank. Those deposits would earn no interest and reduce issuer revenue.

Issuers could place the remaining reserves in sovereign bonds and liquid assets. However, industry groups said the model could make UK stablecoins less competitive. They compared the rules with looser regimes in the United States and Europe.

The BOE based the reserve proposal on recent liquidity stress across financial markets. It considered the speed of deposit withdrawals during banking shocks. Still, officials now see room to test whether the rule goes beyond the needed safety level.

UK Searches For A Stablecoin Middle Ground

The rethink comes as the UK tries to build a stronger digital asset framework. Policymakers want innovation, but they also want clear protection for users and banks. As a result, the BOE must balance growth with financial system safety.

Sterling stablecoins still hold a very small share of the global market. Dollar-pegged tokens dominate the sector, which supports trading, payments, and crypto settlement. UK rules could decide whether pound tokens gain real market use.

A softer BOE approach could support issuers while keeping strict oversight in place. Yet the central bank still treats stablecoins as money, not just crypto products. Hence, the final framework will likely keep strong rules, but with fewer barriers.

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