Lawmakers express concerns over Bank of England stablecoin proposals affecting adoption and pushing activity abroad

A group of British lawmakers has called on the Bank of England to reconsider its proposed regulations on stablecoin holdings, which they argue could limit adoption and push activities abroad. The proposals, still under consultation, suggest imposing a cap on stablecoin holdings of 20,000 ($26,350) for individuals and 10 million ($12.7 million) for businesses, with possible exemptions for larger companies.

Additionally, the proposals require stablecoin issuers to limit their backing assets to 60% in short-term UK government debt, while the remaining 40% would need to be held in interest-free Bank of England accounts. The Bank of England has stated that these measures are designed to protect access to credit as the financial system adapts to digital money, though the rules could be altered or revoked in the future.

In a letter sent to Rachel Reeves, the UK's Chancellor of the Exchequer, lawmakers expressed concerns over the potential negative impact of these regulations. The letter, which was first seen by Bloomberg, argues: "We are deeply concerned that the UK is adopting a fragmented and restrictive approach that will stifle innovation, hinder adoption, and drive activity overseas."

The signatories of the letter, including Peter Cruddas, CEO of CMC Markets, and other prominent figures from the UKs House of Lords, emphasized the need for the UK to adopt a stablecoin framework aligned with leading global standards to maintain its competitiveness.

Among those who signed the letter were Emma Pidding, David Goddard, Kulveer Singh Ranger, Jonathan Berry (the shadow AI minister), and several members of Parliament, including former Defense Secretary Gavin Williamson.

Kulveer Singh Ranger, speaking separately to Bloomberg, warned that the proposed limits on stablecoin holdings could put the UK at a disadvantage, as no other major jurisdiction has taken a similar approach. He also criticized the Bank of England's focus on "systemic stablecoins"sterling-backed digital tokens designed for daily transactions. These proposed rules do not apply to established stablecoins, such as Tether (USDT), which are regulated by the UK's Financial Conduct Authority (FCA).

CryptoUK, a trade association representing firms such as OKX and Gemini, expressed its support for regulatory efforts but cautioned against imposing caps on stablecoin holdings. They argued that such restrictions could undermine the UK's ambitions to be a leader in digital finance, stifle innovation, and deter investment.

The association called for a more balanced, internationally aligned approach to stablecoin regulation, one that would foster innovation, protect consumers, and help the UK remain competitive in the rapidly evolving digital assets space.

In November, Bank of England economists released a policy paper suggesting that a swift transition to digital currencies could pose risks to the liquidity of the UK's banking sector, particularly in high-adoption scenarios. The US has also taken steps to regulate stablecoins, with the GENIUS Act signed into law by former President Donald Trump in July. Unlike the Bank of Englands proposal, the GENIUS Act does not impose limits on individual stablecoin holdings but does enforce reserve requirements for issuers.

Sources:

• Lawmakers Say Bank of England Stablecoin Proposals Will ‘Limit Adoption, Push Activity Overseas’