UK Softens Stance on Stablecoins for Big Players

UK Central Bank Rethinks Stablecoin Limits: Favoritism or Pragmatism?

The Bank of England (BoE) is seemingly backtracking on its initial hardline stance regarding stablecoin regulations, sparking debate about fairness and competitiveness. While initially proposing strict limits on stablecoin holdings, the BoE is now considering waivers for larger firms, particularly crypto exchanges. This shift comes amidst significant pushback from the crypto industry and growing pressure from the U.S., which is developing its own stablecoin framework.

Key Takeaways

• The BoE is considering easing stablecoin restrictions for firms needing large reserves.
• Original proposals included limits of £20,000 for individuals and £10 million for businesses.
• The UK recently approved crypto-linked ETPs for retail investors after a four-year ban.
• US-UK collaboration may align digital asset regulations.

Easing Restrictions

Reports indicate that the BoE is exploring ways to accommodate firms that require substantial stablecoin reserves, potentially undermining the originally planned restrictions. The initial proposal suggested a £20,000 limit for individuals and £10 million for businesses. Concerns were raised that these limitations would stifle innovation and make UK firms less competitive on the global stage.

The US Factor

The United States' passage of the GENIUS Act, which establishes a functional stablecoin framework, has likely added to the pressure. This gives U.S. firms a clear path to launch and scale stablecoin operations, potentially attracting businesses away from the UK.

A Shifting Landscape?

The UK's approach to digital assets is evolving, influenced by its tech partnership with the U.S. and a more open-minded view from BoE Governor Andrew Bailey, who now sees potential in stablecoins for payment innovation.

Recently, the UK allowed retail investors access to crypto exchange-traded notes (cETNs), signaling a potential end to its previously cautious approach to digital assets. This, alongside the potential adjustments to stablecoin regulations, suggests a more accommodating regulatory environment may be on the horizon. A consultation paper is expected by year's end clarifying the direction.

However, the path forward is not without its challenges. Bailey has also expressed concerns about the potential for stablecoins to reduce the role of commercial banks, requiring careful implementation to ensure coexistence.