Key facts
- The Bank of England has removed proposed holding limits for stablecoins.
- A £40 billion issuance cap has been set for stablecoins in the UK.
- Issuers must hold 70% of reserves in government debt and 30% in central bank deposits.
- Previous proposals included temporary ownership caps for individuals and businesses.
- Bank of England Governor Andrew Bailey expressed concerns about global stablecoin regulation and redemption risks.
The Bank of England has decided against implementing holding limits for sterling stablecoins, opting instead for a £40 billion issuance cap. This revised framework allows issuers to hold 70% of their reserves in government debt and the remaining 30% in non-interest-bearing central bank deposits. These changes replace earlier proposals that included temporary ownership caps of £10,000-£20,000 for individuals and £10 million for businesses, which had drawn criticism from the crypto industry for potentially hindering UK competitiveness.
Bank of England Governor Andrew Bailey has voiced concerns regarding the potential financial stability risks associated with stablecoins, particularly those with weak redemption systems. He warned that such limitations could exacerbate financial stress during market disruptions and noted that holders might move funds to jurisdictions with stronger protections. Bailey also highlighted the need for international standards for stablecoins used in cross-border payments, suggesting potential regulatory conflicts with the United States as it advances its own stablecoin legislation.
The Bank of England will oversee financial stability aspects of systemic stablecoins, while the Financial Conduct Authority (FCA) will focus on consumer protection. The global stablecoin market is currently valued at over $317 billion, with most major stablecoins pegged to the U.S. dollar and backed by Treasury bills or cash reserves.