UK’s Stablecoin Regulations Ignite Discussion: Balancing Progress and Security in Effort to Compete with US

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UK’s Stablecoin Regulations Ignite Discussion: Balancing Progress and Security in Effort to Compete with US

Bitget-RWA2025/11/11 04:56

By:Bitget-RWA

- The Bank of England (BoE) announced a stablecoin regulatory framework with £20,000 individual and £10M business holding caps to mitigate redemption risks and ensure liquidity. - Systemic stablecoin issuers must hold 60% reserves in UK government debt and 40% in BoE non-interest-bearing accounts, with phased flexibility for new entrants. - The rules, open for consultation until February 2026, aim to balance innovation with stability while aligning with U.S. regulatory speed, despite industry concerns over

The Bank of England has introduced a comprehensive plan to regulate stablecoins, aiming to strike a balance between fostering innovation and maintaining financial stability. The central bank proposes provisional caps on holdings—£20,000 for individuals and £10 million for businesses—on systemic stablecoins. Issuers will also be required to hold 60% of their reserves in UK government bonds and the remaining 40% in non-interest-bearing accounts at the BoE. These proposals, which are open for public feedback until February 10, 2026, are intended to reduce risks from sudden withdrawals and maintain liquidity during periods of financial stress. The finalized regulations are anticipated by the end of 2026, reflecting the UK’s goal to keep pace with regulatory developments in the United States.

UK Stablecoin Rules Will Be in Place 'as Quickly as the U.S.,' BOE Says: Bloomberg

Deputy Governor Sarah Breeden highlighted the pressing need for these changes, pointing out that the UK’s mortgage sector—heavily dependent on commercial bank lending—could face instability if stablecoins lead to significant deposit outflows.

UK Stablecoin Rules Will Be in Place 'as Quickly as the U.S.,' BOE Says: Bloomberg

. The BoE’s strategy differs from the U.S. approach, which currently does not impose holding limits but is shaped by the recently passed GENIUS Act. While some in the industry, such as Fireblocks’ Varun Paul, have criticized the UK’s stricter measures as potentially unsustainable for business, the BoE maintains that these restrictions are temporary and will be relaxed as systemic risks decrease.

UK’s Stablecoin Regulations Ignite Discussion: Balancing Progress and Security in Effort to Compete with US image 0

Reserve requirements for stablecoin issuers are seen as a crucial compromise. Initially, newcomers may allocate up to 95% of their reserves in government securities, gradually reducing this to 60% as their operations expand. This phased approach is designed to encourage innovation while maintaining strong liquidity safeguards. The BoE also expressed concerns about the UK’s bond market’s capacity to absorb increased demand from stablecoin reserves, leading to plans for improved access to central bank liquidity.

The regulatory system will be implemented through coordinated oversight. His Majesty’s Treasury will determine which stablecoins are systemic based on their size and influence, while the Financial Conduct Authority (FCA) will supervise non-systemic tokens and consumer protection measures. Stablecoins not pegged to sterling, such as

USDT

and

USDC

, are not directly regulated by the BoE but are under ongoing evaluation.

Industry feedback has been varied. Leading stablecoin providers, including

Circle

and

Tether

, are preparing to enter the UK market, which is home to 7 million crypto users—a substantial opportunity

UK Floats £20000 Stablecoin Limit in Tougher Regime ...

. Nonetheless, some critics argue that the 40% requirement for non-interest-bearing reserves could put UK issuers at a disadvantage compared to their U.S. peers, who do not face such rules. The BoE’s ongoing consultation, which marks a shift from its stricter 2023 proposals, aims to refine the regulations based on industry input.

With the number of crypto users in the UK rising by 204% since 2021, the BoE’s regulatory approach is intended to establish the country as a leading center for digital assets while protecting financial stability. As Deputy Governor Breeden remarked, the objective is to “have our regulatory regime operational as swiftly as the U.S.”

UK Stablecoin Rules Will Be in Place 'as Quickly as the U.S.,' BOE Says: Bloomberg

. The final outcome is expected to have a significant impact on global regulatory standards, given London’s prominent role in international finance.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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