The Bank of England has made significant concessions in its forthcoming stablecoin regulations, in a bid to bolster the UK's competitiveness in the global financial system. A key revision sees the scrapping of plans to cap individual customer deposits, replaced by a temporary ceiling of £40 billion on the overall volume of sterling-denominated stablecoins circulating at any given time.
The revised framework also reduces the proportion of deposits that stablecoin issuers must hold in non-interest-bearing reserves from 40% to 30%, providing providers with greater flexibility to generate returns on their holdings. Deputy Governor Sarah Breeden hailed the new rules as a "major milestone" for UK payments, highlighting the importance of establishing trust through prompt redemption and robust protections.
While some industry voices have welcomed the adjustments, others remain concerned that the Bank's framework still risks being overly restrictive compared to other leading jurisdictions. Janine Hirt, chief executive of Innovate Finance, argued that widespread adoption of stablecoins could offer significant cost savings and productivity gains for UK businesses and households, but this potential may be hampered if the UK's regulatory environment is perceived as overly cautious.
The deliberation over stablecoin regulation has been extensive, with the Bank previously floating various blueprints, some of which drew sharp criticism from the cryptocurrency sector and political figures. The final framework represents the Bank's definitive attempt to establish rules for this rapidly expanding sector, which currently operates predominantly in dollars.