The Bank of England is taking another look at its strict stablecoin regime, weighing whether to ease caps on issuance and loosen reserve requirements. The move comes after months of pushback from crypto firms who argued the proposed rules would choke off innovation in the UK's digital asset sector.
What sparked the rethink
Industry players had warned that the original framework, unveiled last year, went too far. Caps on the total value of stablecoins in circulation and demands that issuers hold all reserves in cash or short-term government bonds were seen as too restrictive. Critics said the rules would make it impossible for UK-based projects to compete with counterparts in the US and Europe, where regulators have taken a lighter touch.
The Bank hasn't said exactly how it might change the rules. But people familiar with the discussions say officials are now more open to a tiered approach — one that would apply stricter requirements only to systemically important stablecoins, while letting smaller projects operate under lighter oversight.
What's on the table
Among the options being discussed: raising the cap on individual stablecoin issuance, allowing a broader mix of reserve assets, and giving issuers more time to meet compliance deadlines. The aim is to strike a balance between protecting financial stability and keeping the UK attractive for fintech and crypto businesses.
The stablecoin market has grown rapidly, with the total value of major tokens like Tether and USDC now above $150 billion globally. UK regulators have been watching closely, worried that a run on a large stablecoin could spill over into traditional markets. But they also know that a too-aggressive stance could drive companies to friendlier jurisdictions.
What comes next
The Bank is expected to publish a revised consultation document in the coming months. That will be followed by a comment period before final rules take effect. Industry groups say they'll keep pushing for a framework that doesn't put UK projects at a disadvantage.
The Treasury is also involved. Chancellor Jeremy Hunt has made crypto hub ambitions a priority, and officials there are said to be pressing the Bank to move faster and go easier. A final timeline isn't set, but the signal from Threadneedle Street is clear: the original plan is being softened.
