The UK appears to be moving away from a debilitative approach to stablecoin utilization, part of a broader payments strategy.
Last year, the Bank of England introduced a structure that required holding limits of £20,000 per individual and £10 million per business, and that at least 40% of backing assets be held as unremunerated deposits at the Bank of England, with up to 60% in short-term UK government debt. Recent statements appear to pump the brakes on an “excessively conservative” approach to stablecoins, which would be out of sync with what is evolving in the US.
Draft rules for stablecoins in the UK are anticipated to be released next month.
Katie Harries, Head of Policy, Europe at Coinbase, has issued a statement supporting the more relaxed approach, describing it as a vision of a competitive digital money ecosystem with a wider range of technologies and business models.
“… it’s interesting that the Deputy Governor is floating the idea of a stablecoin issuance cap instead of holding limits. As a measure, it may be more workable — depending on where the cap is set — but critically, no other jurisdiction is deeming it necessary to cap innovation in the way that the Bank of England is still considering,” says Harries.
Clearbank Group CEO Mark Fairless also welcomed the change in policy posture.
“The Deputy Governor’s comments recognize an important point, that measures such as holding limits are difficult to implement in practice. This review creates a valuable opportunity to develop a proportionate, risk-based framework that protects financial stability while supporting innovation and healthy competition. Getting this balance right will be critical to sustaining the UK’s momentum in digital finance,” says Fairless.
He states that stablecoins have the potential to meaningfully improve the speed and efficiency of payments while supporting the next generation of financial services.
“A clear and workable regulatory framework will help ensure the UK remains an attractive environment for innovation and continues to strengthen its position as a leading global financial centre,” Fairless stated.
While the UK seems more open to privately issued stablecoin issuance, the EU is heading toward a central bank digital currency for retail use. This would mean the European Central Bank would control the digital Euro and potentially subject citizens’ activity to greater monitoring and government policy controls.