Bank of England Proposes £20,000 Cap on Retail Stablecoin Holdings

The Bank of England has projected impermanent limits connected stablecoin holdings for retail and concern users and caller rules for however issuers tin negociate their reserves.

In a consultation insubstantial published Monday, the cardinal slope said individuals would beryllium allowed to clasp up to £20,000 (US$26,000) successful a azygous systemic stablecoin, portion businesses would look a £10 cardinal (US$13.1 million) cap.

Notably, the connection “would not screen stablecoins utilized arsenic assets for non-systemic purposes, specified arsenic the buying and selling of cryptoassets,” the slope wrote, adding that specified cases stay to beryllium “the predominant usage of stablecoins today.”

The restrictions are described arsenic transitional, designed to forestall abrupt outflows from accepted slope deposits during the archetypal signifier of adoption.

According to the Bank, the limits would beryllium loosened and yet removed erstwhile the risks to fiscal stableness subside. The connection applies to stablecoins recognized arsenic “systemic,” meaning those that could beryllium wide utilized successful mundane payments. Non-systemic tokens volition beryllium regulated separately by the Financial Conduct Authority.

The consultation accompanies a elaborate Financial Stability Paper that outlines however issuers would beryllium required to support backing assets.

Up to 60% of reserves could beryllium held successful short-term UK authorities debt, with the remainder held arsenic unremunerated deposits astatine the cardinal bank. The insubstantial notes that allowing a greater stock successful interest-bearing instruments could impact spot and assurance successful wealth by limiting liquidity during periods of stress.

The cardinal slope said it is besides considering providing recognized issuers entree to its liquidity facilities to guarantee they tin conscionable redemption requests. It acknowledged that the size and operation of the UK’s short-term indebtedness marketplace whitethorn not enactment large-scale stablecoin request successful its existent form.

UK Stablecoin Regs Coming 'Just arsenic Quickly' arsenic US: Bank of England

“The UK's cautionary attack is aligned with however the authorities has been dealing with crypto regularisation for rather immoderate clip now,” Cessiah Lopez, caput of argumentation and probe astatine Solana’s Superteam UK, told Decrypt.

The Bank’s latest connection represents a softening from its 2023 treatment paper, which recommended that each reserves beryllium held arsenic cardinal slope deposits only.

“Requiring systemic issuers to clasp immoderate of their reserves successful cardinal slope deposits could really springiness GBP-backed stablecoins a structural edge, since their reserves would beryllium successful cardinal slope wealth alternatively than commercialized slope deposits,” Lopez said. In turn, this could “help fortify assurance and systemic resilience,” portion the caps could beryllium lifted “once risks BoE are trying to debar subside,” she added.