Bank of England softens stablecoin rules in final policy draft
Overview of the Bank of England's Stablecoin Policy Changes
LONDON, June 22 (Reuters) - The Bank of England on Monday eased proposed stablecoin rules following widespread concern they risked stifling development of a nascent sterling-backed market, though some in the industry said the changes fell short of enabling an internationally competitive sector.
Key Changes in the Final Policy Draft
The BoE, which is finalising rules for sterling stablecoins that can be widely used for retail payments, scrapped plans to cap the amount of stablecoins individuals can hold, opting instead to limit total issuance per stablecoin, initially set at £40 billion ($52.8 billion).
Adjustments to Backing Asset Requirements
It also slightly relaxed a proposal on backing assets to allow issuers of widely used stablecoins to invest up to 70% - versus 60%, previously - of assets backing them in short-term government debt. The remainder must be held in non-interest-bearing central bank deposits.
Definition and Growth of Stablecoins
Stablecoins are digital tokens designed to keep a constant value that are often pegged to a fiat currency and backed by traditional assets such as government debt. They have grown rapidly in recent years, particularly under the crypto-friendly U.S. Trump administration.
Regulatory Landscape: UK vs. EU
In the UK, they are currently subject to limited rules focused largely on anti-money laundering and financial promotions, in contrast to the European Union where the comprehensive MiCA regime has been in force since December 2024, although it is now coming under review.
Industry Feedback and Next Steps
Although the BoE described its policy position as final, it also said it welcomed feedback before September 22 "on any remaining challenges that industry may identify".
Mixed Reaction from Industry
MIXED REACTION FROM INDUSTRY
While industry representatives welcomed the changes, some said the BoE still had not gone far enough to allow sterling stablecoins to compete internationally.
Concerns from Fintech and Banking Leaders
Adam Jackson, from fintech lobby Innovate Finance, said the BoE's incremental amendments took some feedback on board, "but actually the fundamentals haven't changed... It still remains the most cautious, the most conservative regime in the world."
"The UK will be the only country in the world where as much as 30% of banking assets are earning no income whatsoever, which means the business model for the UK has to be different from anywhere else in the world, so why would you invest in the UK?" Jackson said.
Describing the changes as encouraging, ClearBank Group CEO Mark Fairless however said, "the UK cannot win the global race on digital assets if sterling stablecoins remain less commercially viable or less useful than their dollar and euro counterparts".
Positive Outlook from Industry Stakeholders
Katie Harries, Europe head of policy at Coinbase, an exchange, described the reserve composition as workable and capital requirements as proportionate.
"This is a major milestone in delivering greater choice and innovation in UK payments," Deputy Governor for Financial Stability Sarah Breeden said.
Additional Information
($1 = 0.7569 pounds)
(Reporting by Phoebe Seers and Sam Tabahriti; Editing by Emelia Sithole-Matarise)