Lawmakers Say Bank of England Stablecoin Proposals Will ‘Limit Adoption, Push Activity Overseas’
TL;DR
UK lawmakers warn that Bank of England proposals to cap stablecoin holdings and impose strict reserve requirements could stifle innovation, limit adoption, and push crypto activity overseas, urging a more competitive approach.
Key Takeaways
- •Lawmakers urge the Bank of England to reconsider caps on stablecoin holdings ($26,350 for individuals, $12.7M for businesses) and reserve rules (60% in UK government debt, 40% in non-interest accounts).
- •Critics argue the proposals risk making the UK less competitive globally, as no other major jurisdiction imposes such caps, potentially driving innovation and capital abroad.
- •The rules target 'systemic stablecoins' for payments, not existing ones like USDT, with the BoE aiming to safeguard credit access as digital money evolves.
- •Industry groups like CryptoUK support regulation but oppose caps, advocating for a proportionate, internationally benchmarked framework to foster innovation and protect consumers.
- •The BoE's concerns include potential threats to banking liquidity from rapid digital money adoption, contrasting with U.S. laws that lack individual caps but regulate issuer reserves.
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A group of British lawmakers has urged the Bank of England to reconsider proposals that would cap stablecoin holdings for citizens and businesses, and impose stringent reserve requirements on issuers.
Under the proposals—which are still undergoing consultation—stablecoin holdings would be capped at $26,350 (£20,000) for private individuals and $12.7 million (£10 million) for businesses, with some exemptions possible for larger firms.
In addition, stablecoin issuers would only be permitted to hold up to 60% of their backing assets in short-term UK government debt. The remaining 40% would need to be held in unremunerated Bank of England accounts that bear no interest.
The central bank said the measures are intended to safeguard “continued access to credit as the financial system gradually adapts to new forms of digital money,” adding that the rules could be changed or removed in the future.
In a letter addressed to Rachel Reeves, the UK’s chancellor of the exchequer, first seen by Bloomberg, the signatories warned: “We are deeply concerned that the UK is drifting towards a fragmented and restrictive approach that will deter innovation, limit adoption, and push activity overseas.”
“To remain globally competitive, the UK must ensure its stablecoin framework is benchmarked against leading international models,” the letter added.
Signatories included Peter Cruddas, CEO of trading platform CMC Markets, alongside Emma Pidding, David Goddard, Kulveer Singh Ranger, and shadow AI minister Jonathan Berry, all members of the UK’s House of Lords. Several sitting MPs also signed the letter, including former defense secretary Gavin Williamson.
Kulveer Singh Ranger told Bloomberg in a separate statement that the proposed caps on stablecoin holdings “risk putting the UK at a disadvantage when no other major jurisdiction is taking this approach.”
The BoE’s recommendations only apply to what it calls “systemic stablecoins”—privately issued, sterling-backed digital tokens that could be used for day-to-day payments, such as buying goods online. These rules won’t apply to currently available stablecoins, like Tether’s USDT, which are regulated by the UK’s Financial Conduct Authority (FCA).
A spokesperson for trade association CryptoUK told Decrypt it “welcomes efforts to regulate stablecoins,” but cautioned against imposing caps on holdings. They argued that “such restrictions risk undermining the UK’s ambition to lead in digital finance, whilst driving innovation and attracting capital.”
The industry group, which includes exchanges like OKX and Gemini, called on policymakers to instead opt for a “proportionate, internationally benchmarked approach,” saying this would foster innovation, protect consumers, and help the UK stay competitive in the world of digital assets.
In a policy paper released in November, Bank of England economists argued that a rapid shift toward digital money could threaten the liquidity of Britain’s banking sector—particularly under high-adoption scenarios.
The GENIUS Act, which U.S. President Donald Trump signed into law in July to regulate stablecoin activity, contains no such caps on individuals’ stablecoin holdings, though it does mandate restrictions on stablecoin issuers’ reserves.