Michaela
The Bank of England has reportedly been considering exemptions to its proposed limits on stablecoin holdings, a move that would allow systemic stablecoins to back reserves with short-term government bonds.
Key points:
- The Bank of England is considering exemptions to stablecoin holding limits, allowing systemic stablecoins to back reserves with short-term government bonds and be used in its Digital Securities Sandbox.
- Proposed ownership caps range from £10,000–£20,000 per individual, with a potential lower threshold of £5,000, though enforcement challenges and industry concerns persist.
- Regulators warn that unrestricted stablecoin use could disrupt traditional banking, while policymakers aim to balance innovation, financial stability, and the UK’s competitiveness in the global crypto market.
According to a report by Bloomberg, the Bank of England plans to grant waivers to select firms, including crypto exchanges, that require large stablecoin holdings for liquidity and settlement. The UK central bank also aims to allow stablecoins to be used as settlement assets within its Digital Securities Sandbox, providing a controlled environment to test blockchain-based issuance and trading.
Industry experts caution that the UK could lag behind the U.S., where the GENIUS Act has provided clear guidelines for dollar-backed stablecoins. Some warn that Britain’s stricter regulatory approach may push innovation and liquidity overseas.
Related: Florida Court Lets $80M Binance Bitcoin Lawsuit Move Forward
A key focus is the ownership limits proposed by the Bank of England, suggesting individual caps on digital pounds between £10,000 and £20,000 (about $13,000–$27,000) while also seeking input on a potential lower threshold of £5,000.
Simon Jennings, executive director of the UK Cryptoasset Business Council (UKCBC), said individual stablecoin limits would be difficult to enforce, noting that issuers often lack real-time insight into token holders, making compliance both complex and expensive.
Central bankers, however, caution that unrestricted stablecoin use could prompt significant withdrawals from traditional bank deposits, posing risks to credit availability and financial stability, with regulators emphasizing the potential for these digital assets to disrupt the conventional financial system.
Related: US CFTC Approves Spot Crypto Trading on Regulated Exchanges
As the UK navigates the rapidly evolving digital asset landscape, the outcome of these regulatory decisions could shape the country’s position in the global crypto market for years to come.
While stablecoins remain a small fraction of the UK financial system today, their growth potential is significant. Policymakers face the challenge of fostering technological advancement while safeguarding consumers and institutions, setting the stage for a cautious but forward-looking approach to integrating digital currencies into mainstream finance.
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MICHAELA
Michaela is a news writer focused on cryptocurrency and blockchain topics. She prioritizes rigorous research and accuracy to uncover interesting angles and ensure engaging reporting. A lifelong book lover, she applies her passion for reading to deeply explore the constantly evolving crypto world.
