The Bank of England has unveiled a significant shift in its regulatory approach towards stablecoins. On June 22, it announced new guidelines for systemic stablecoin issuers, setting a temporary issuance limit at 40 billion pounds for each stablecoin but removing previous caps on individual holdings. This regulatory adjustment marks a pivot from monitoring personal stablecoin possessions to focusing on total circulation, redefining oversight mechanisms.
How does this change affect issuers?
The abolition of individual wallet limits redirects regulatory attention towards the total issuance by stablecoin companies. Previously proposed limits of 20,000 pounds per individual and 10 million pounds per business were discarded. The Bank of England believes this shift simplifies regulation, making it more straightforward and less resource-intensive. This viewpoint is echoed by the UK Cryptoasset Business Council, which had cautioned against the complexity and cost of tracking individual holdings.
The removal of these caps allows issuers to focus on their overall issuance strategies. The new framework is designed to streamline regulatory requirements by removing unnecessary complications related to tracking numerous individual accounts across platforms.
Coinbase’s Head of European Policy welcomed the new framework but highlighted two areas of uncertainty: the meaning of the word “temporary” in the new issuance cap and whether stablecoins will be allowed for settlements in core wholesale markets.
What are the new collateral requirements?
The revised framework also modifies how stablecoin reserves are managed. Issuers now must hold up to 70 percent of their reserves in short-term, interest-bearing UK government securities, while the remaining 30 percent must be retained as central bank deposits. This approach aims to strengthen the financial resilience of stablecoin issuers during turbulent market periods.
Regulators believe that this 70-30 collateral structure will boost the financial health of these issuers. The Bank of England suggests that the approach could offer a competitive edge over similar frameworks in the US and Europe, enhancing profitability while ensuring stability.
Was the initial proposal too restrictive?
Deputy Governor Sarah Breeden admitted that prior proposals may have exhibited excessive caution. The current adjustments, according to Breeden, seek to achieve similar regulatory goals more efficiently and cost-effectively. The removal of individual holding limits responds to criticisms from industry leaders like Coinbase CEO Brian Armstrong, who warned that such restrictions could hamper the UK’s competitive edge.
The House of Lords Financial Services Regulation Committee also supported these changes. They argued against premature, sweeping market restrictions, noting the relatively small size of the pound-based stablecoin market.
- Stablecoin market regulation is shifting to focus on total issuance rather than individual holding caps.
- A new collateral structure has been introduced to bolster stablecoin issuer resilience.
- Stakeholders have expressed concerns about the long-term implications of these ‘temporary’ measures.
As companies in the UK continue to experiment within the regulatory sandbox, the Bank of England remains open to feedback on these regulatory changes until September 22, 2026. With the final guidelines anticipated by year-end, the stablecoin regulatory landscape in the UK is set for a considerable transformation, aiming for a 2027 launch of the new regime.
