Bank of England Revises Corporate Stablecoin Holding

TLDR

Table of Contents

The Bank of England is reconsidering caps on corporate stablecoin holdings.
BOE may grant exemptions to firms requiring larger fiat-backed stablecoins.
Stablecoin limits faced industry backlash, especially from crypto-native companies.
The UK faces increasing pressure from the US and EU on stablecoin regulation.

The Bank of England (BOE) is reportedly reconsidering its proposed limits on corporate stablecoin holdings, according to a Bloomberg report. The central bank plans to introduce exemptions for certain companies that may require larger reserves of fiat-pegged assets.

This shift in approach comes as the BOE faces significant industry pushback and increasing international competition, notably from the U.S., which is advancing clearer stablecoin regulations through the GENIUS Act.

BOE’s Original Stablecoin Limits

Earlier this year, the BOE had suggested capping stablecoin holdings at 20,000 pounds (around $27,000) for individuals and 10 million pounds for businesses. These caps were introduced to mitigate concerns over systemic risks associated with widely used stablecoins like USDt (Tether) and USDC. The BOE’s primary goal was to prevent excessive reliance on privately issued digital currencies while maintaining control over the money supply and protecting consumers.

However, these proposed limits have faced considerable pushback, especially from crypto-native companies. Many of these businesses argue that such caps would hinder their ability to manage liquidity and support operations, as they often hold substantial stablecoin reserves for trading and liquidity purposes.

Potential Exemptions for Crypto Companies

As a result of this backlash, the BOE is now considering offering exemptions for crypto companies that require larger stablecoin holdings. Bloomberg reported that discussions are ongoing regarding how to address the needs of these firms while still managing systemic risks. This change in direction indicates the BOE’s willingness to adapt its regulatory approach in response to industry needs.

Simon Jennings of the UK Cryptoasset Business Council has been vocal in his criticism of the proposed limits, claiming that they would not be effective in practice. Meanwhile, the BOE’s evolving stance reflects a broader balancing act between maintaining financial stability and fostering competitiveness in the rapidly developing stablecoin sector.

Shifting Views on Stablecoins

Governor Andrew Bailey of the BOE had previously raised concerns about the potential threat stablecoins posed to financial stability and the government’s ability to control monetary policy. However, Bailey’s tone has shifted recently, as he acknowledged the possible benefits of stablecoins as a financial innovation.

The BOE’s willingness to reconsider its approach shows a growing recognition that stablecoins could play a role in the broader financial system.

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