Bank of England eases stablecoin rules, introduces 40B pound issuance cap

Bank of England eases stablecoin rules, introduces 40B pound issuance cap

The Bank of England published draft rules for systemic stablecoins, easing reserve requirements and replacing holding limits with a temporary 40-billion British pound issuance cap.

Systemic stablecoins entail payments and retail-focused tokens. Source: Bank of England

At the time, the Bank argued the limits were needed to prevent large-scale shifts of deposits out of the banking system, which could reduce the availability of credit to households and businesses. Respondents to the consultation warned that the restrictions could limit the usability of stablecoins and create operational challenges for issuers.

The Bank said the new approach is intended to achieve the same policy objective while allowing unrestricted use by households and businesses.

"The endgame should be a truly risk-based framework rather than a one-size-fits-all approach, otherwise the UK is in danger of leaving sterling stablecoins at the starting line while other markets move ahead."

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Scope of the regime

The regime will apply only to stablecoins deemed systemic, while non-systemic stablecoins used mainly for crypto trading will remain under the Financial Conduct Authority's supervision.

Background

In May, BoE Deputy Governor Sarah Breeden said the central bank was reconsidering its proposed holding limits and reserve requirements following feedback from digital asset companies, which argued that the restrictions could hinder adoption and make UK-issued stablecoins less competitive with US dollar-backed rivals.