UK’s Stablecoin Regulations Ignite Discussion: Balancing Progress and Security in Effort to Compete with US
- 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.
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.
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
Industry feedback has been varied. Leading stablecoin providers, including
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.”
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