tl;dr
The Bank of England is reportedly softening its stance on corporate stablecoin limits amid industry pressure and global competition, signaling a potential shift in regulatory approach to balance innovation and financial stability.
**Bank of England Softens Stance on Corporate Stablecoin Limits Amid Industry Pressure and Global Competition**
The Bank of England (BoE) is reportedly reconsidering its proposed restrictions on corporate stablecoin holdings, signaling a potential shift in its regulatory approach. According to a Bloomberg report, the central bank is exploring exemptions for companies that require larger reserves of fiat-pegged assets, a move driven by industry pushback and intensifying global competition, particularly from the United States.
Earlier this year, the BoE had floated proposals to cap stablecoin holdings, setting a limit of 20,000 pounds ($27,000) for individuals and 10 million pounds for corporations. The measures aimed to mitigate systemic risks associated with widely used stablecoins like Tether (USDT) and USD Coin (USDC), which the BoE warned could threaten financial stability and undermine monetary policy. However, the proposed caps have faced criticism from industry stakeholders, who argue they could stifle innovation and hinder the operations of crypto-native businesses reliant on substantial stablecoin reserves for trading and liquidity.
The BoE’s potential reversal comes as the UK grapples with its position in the rapidly evolving stablecoin landscape. The United States, in contrast, has advanced clearer regulatory frameworks, such as the GENIUS Act, signed into law in July 2023, which aims to provide a structured environment for stablecoin innovation. This regulatory divergence has intensified pressure on the BoE to balance oversight with competitiveness.
Simon Jennings, a representative of the UK Cryptoasset Business Council, criticized the original limits as impractical, stating they “simply don’t work in practice.” Meanwhile, BoE Governor Andrew Bailey, who previously warned of the risks posed by private stablecoins, has adopted a more measured tone. At a recent event, Bailey acknowledged the potential of stablecoins as a “useful innovation” that could coexist within the financial system.
The BoE’s evolving stance reflects broader challenges in regulating stablecoins while fostering innovation. Critics argue that the UK has lagged behind the U.S. and the European Union in establishing a proactive regulatory framework. The global stablecoin market now exceeds $314 billion, with the majority of tokens pegged to the U.S. dollar. In contrast, pound-pegged stablecoins remain negligible, with less than $1 million in circulation, according to DefiLlama data.
Despite these concerns, industry leaders like Tether co-founder Reeve Collins predict a future where all fiat currencies exist in stablecoin form. “All currency will be a stablecoin,” Collins stated at the Token2049 conference in Singapore, forecasting that by 2030, even traditional currencies like the dollar or euro could be represented as stablecoins. He highlighted their role in enabling tokenized assets, which are increasingly attracting traditional financial institutions.
As the BoE weighs its next steps, the debate underscores the tension between safeguarding financial stability and embracing the transformative potential of stablecoins. With global regulators racing to define their approaches, the UK’s ability to adapt will be critical in determining its role in the future of digital finance.