UK Lawmakers Urge Action Against Bank of England’s Stablecoin Proposals

TLDR

• MPs warn that Bank of England’s stablecoin plan could push innovation offshore.
• UK stablecoin proposals may drive activity toward dollar-pegged tokens like USDC.
• Lawmakers urge UK to adopt flexible stablecoin rules to stay competitive.
• Stablecoins are becoming a key part of the global digital economy, MPs argue.

A coalition of U.K. lawmakers is raising concerns over the Bank of England’s regulatory framework for stablecoins. In a letter to Chancellor Rachel Reeves, the lawmakers argue that the current proposals may stifle innovation in the digital economy and push capital and innovation away from the UK.

The letter, signed by several prominent members of the House of Commons and the House of Lords, warns that the Bank of England’s proposed rules could risk undermining the City of London’s standing as a global financial hub.

The lawmakers, including former Defense Secretary Sir Gavin Williamson, Viscount Camrose, and Baroness Verma, assert that stablecoins are quickly becoming a fundamental part of the digital economy. These digital tokens, which are pegged to traditional fiat currencies like the British pound or the U.S. dollar, are reshaping financial transactions and markets globally. MPs express concern that the UK risks becoming a “global outlier” if the proposed regulatory framework is adopted as it is currently designed.

Stablecoin Proposals Could Push Innovation Abroad

The lawmakers argue that the Bank of England’s proposed restrictions on stablecoins would discourage innovation and possibly push businesses and investors to jurisdictions with more flexible regulations. Under the current framework, certain wholesale uses of stablecoins would be restricted, and issuers would face stringent reserve requirements.

For example, the proposals call for holding limits on stablecoins of £20,000 ($26,500) for individuals and around $13.3 million for businesses. The plan also suggests that at least 40% of reserves must be kept in unremunerated deposits at the Bank of England.

These limitations, the MPs argue, could make British-pound pegged stablecoins unattractive compared to dollar-backed alternatives like USDC and USDT, which are already widely used across global markets. With more flexible regulations abroad, the lawmakers fear the UK could see its stablecoin market shrink as activity shifts to other regions, particularly the U.S. and the European Union.

The UK Risks Losing Its Fintech Leadership

The MPs emphasize that stablecoins have the potential to reshape financial infrastructure. Transactions in stablecoins reached $27.6 trillion in 2024, surpassing the combined activity of Visa and Mastercard. With projections suggesting that this figure could exceed $100 trillion by 2030, stablecoins are becoming a key component of the digital economy.

However, lawmakers express concern that the Bank of England’s proposals, particularly the caps on stablecoin holdings and the restrictions on the use of stablecoins in wholesale markets, could leave the UK lagging behind in this rapidly growing sector.

While the EU has already enacted the Markets in Crypto-Assets Regulation (MiCA), which offers a more balanced approach to regulating stablecoins, the UK risks falling behind in the race for digital asset innovation if it does not adopt a more flexible approach.

Call for Pro-Innovation Regulation

The letter concludes with a call to Chancellor Rachel Reeves to intervene and ensure that the UK’s regulatory framework supports innovation while safeguarding financial stability. The MPs stress that the UK should remain a leading destination for digital assets and fintech growth. As the U.S. accelerates its regulatory efforts through the recently enacted GENIUS Act, UK lawmakers fear that the country could lose its competitive edge in the global digital finance market.

“We urge you to intervene,” the lawmakers said in their open letter, urging the government to create a stablecoin framework that encourages international investment and supports fintech growth in the UK.

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