Bank of England reviews stablecoin regime after industry pushback on deposit and holding limits
The Bank of England is reassessing key elements of its proposed stablecoin regime after pushback from industry, the central bank's deputy governor for financial stability Sarah Breeden has told the Financial Times.
Two provisions are under review. The first is the BoE's draft holding limits, which would cap individuals at £20,000 per stablecoin and businesses at £10 million. The limits are intended to reduce the risk of sudden large deposit outflows from banks. The second is a proposal that at least 40% of the assets backing a UK stablecoin be held as non-interest-bearing deposits at the BoE, with the remainder in sovereign bonds and other liquid assets. The 40% requirement is more restrictive than the equivalent US rules and would weigh directly on stablecoin issuers' profitability.
"We are keen to create a regime where stablecoins can succeed and can deliver benefits to the users," Breeden said. "But it is money and we want to make sure that this new form of money is safe." She added that the deposit requirement "was based on experience of potential liquidity stress. But we will look hard to see if we have been overly conservative in our thinking there."
The context is small but growing. Sterling-based stablecoins currently represent less than 0.5% of the roughly $315 billion global stablecoin market. Crypto asset firms have warned that an overly cautious UK regime risks ceding ground to jurisdictions moving more quickly, notably the US following the passage of its own stablecoin legislation.
For banks, the BoE's recalibration matters in two ways. If individual and business holding limits are loosened, sterling stablecoins become a more plausible cash-management tool, which puts more pressure on deposit pricing. If the 40% non-interest-bearing deposit requirement is softened, the economics of issuing a regulated UK stablecoin improve sharply, which lowers the barrier for both incumbents and challengers to enter the market.
