{"id":329019,"date":"2025-12-22T01:37:18","date_gmt":"2025-12-22T01:37:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/329019\/"},"modified":"2025-12-22T01:37:18","modified_gmt":"2025-12-22T01:37:18","slug":"uk-lawmakers-warn-stablecoin-plans-risk-stifling-innovation","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/329019\/","title":{"rendered":"UK lawmakers warn stablecoin plans risk stifling innovation"},"content":{"rendered":"

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\n <\/a> > UK lawmakers warn stablecoin plans risk stifling innovation<\/p>\n

A bipartisan group of United Kingdom lawmakers has called on the Bank of England (BoE), the country\u2019s central bank, to reconsider proposals that would put a cap on stablecoin<\/a> holdings and impose strict reserve requirements on issuers, arguing that the measures may \u201cpush activity overseas.\u201d<\/p>\n

In a December 11 letter addressed to U.K. Chancellor of the Exchequer Rachel Reeves, lawmakers from the House of Commons and the House of Lords\u2014the U.K.\u2019s lower and upper houses of Parliament, respectively\u2014voiced concerns related to a BoE consultation paper published<\/a> in November on the bank\u2019s proposed regime for so-called \u2018systemic stablecoins<\/a>\u2019 (SSC), which are widely used in payments and therefore may pose risks to financial stability.<\/p>\n

The central bank\u2019s proposals<\/a> that appear to have drawn the most ire include capping stablecoin holdings at \u00a320,000 ($26,762) for private individuals and \u00a310 million ($13.3 million) for businesses, with some exemptions for larger firms. The measure is intended to protect against the possibility of a shortfall in the backing assets or failure of the issuer, as happened in the notorious 2022 collapse of the Terraform Labs ecosystem<\/a>.<\/p>\n

Another of the bank\u2019s proposals stated that SSC issuers would only be permitted to hold up to 60% of their backing assets in short-term government debt. The remaining 40% would need to be held in unremunerated BoE accounts that bear no interest.<\/p>\n

The bank said the proposals would safeguard \u201ccontinued access to credit as the financial system gradually adapts to new forms of digital money,\u201d but that the rules could be amended or removed in the future.<\/p>\n

In the letter to Chancellor Reeves, first reported<\/a> by Bloomberg last Thursday, the lawmakers warned that with these measures, \u201cthe U.K. is drifting towards a fragmented and restrictive approach that will deter innovation, limit adoption, and push activity overseas.\u201d<\/p>\n

\u201cStablecoins are reshaping the financial infrastructure by lowering costs, accelerating settlements, and promoting financial inclusion,\u201d read the letter. \u201cFar from being a fringe experiment they are becoming a pillar of the digital economy, with transactions reaching $27.6 trillion dollar in 2024 \u2013 7.7% more than Visa and Mastercard combined.\u201d<\/p>\n

With this in mind, it cautioned that \u201cthe Bank of England\u2019s proposals risk preventing the U.K. from fully capitalizing on these opportunities and undermining the Government\u2019s ambition to lead in digital assets<\/a> and financial innovation.\u201d<\/p>\n

Consecutive U.K. governments have shared an ambition to make the U.K. a digital asset hub. As far back as April 2022, then Chancellor Rishi Sunak was laying out the Conservative Government\u2019s goal \u201cto make the UK a global hub for cryptoasset technology.\u201d<\/p>\n

The Labour Party put an end to 14 years of Conservative rule last July, halting many plans of the former government, yet one ambition it carried over is to make the U.K. a digital asset hub<\/a>. In April, Chancellor Reeves backed this vision when she emphasized<\/a> that \u201cthe government remains committed to making the U.K. a global hub for digital asset technologies.\u201d<\/p>\n

It was to Reeves then that the cross-party Lords and MPs appealed, in their letter bemoaning the BoE proposals. They argued that \u201cto remain globally competitive, the UK must ensure its stablecoin framework is benchmarked against leading international models.\u201d<\/p>\n

Signatories of the letter included, from the House of Lords, Peter Cruddas, CEO of trading platform CMC Markets, Emma Pidding, David Goddard, Kulveer Singh Ranger, and shadow AI minister Jonathan Berry. A number of sitting MPs also signed the letter, including former defense secretary Sir Gavin Williamson.<\/p>\n

The U.K. is still attempting to finalize the legislation<\/a> that would officially designate rulemaking authority over the different parts of the digital asset sector, as well as various stablecoins. As such, the BoE, along with the other principal regulators that will oversee the digital asset sector\u2014namely the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)\u2014remain in a cycle of consultation and feedback for the time being.<\/p>\n

Meaning, there is still time for advocates of the digital asset space, and financial innovation more broadly, to influence the plans.<\/p>\n

Back to the top \u2191<\/a><\/p>\n

UK\u2019s proposed stablecoin rules<\/p>\n

In its February 2023 consultation on the Future Regulatory Regime for Cryptoassets<\/a>, HM Treasury proposed giving rulemaking authority for the digital asset space, including the majority of stablecoins, to the country\u2019s top finance sector authority, the FCA, with one caveat: that SSCs were to be under the BoE\u2019s jurisdiction.<\/p>\n

The central bank subsequently published a discussion paper<\/a> in November 2023 setting out its proposed regulatory framework for SSCs and related service providers, focusing on sterling-denominated stablecoins because it considers these the most likely digital settlement assets to be used widely for payments in the U.K<\/a>.<\/p>\n

It proposed a \u201csame risk, same regulatory outcome\u201d approach, which included requiring that there is an entity across the payment chain that can be identified as the payment system operator; issuers fully backing stablecoins with deposits at the BoE, with no interest to be paid on these deposits; and wallet providers needing to ensure that coinholders\u2019 legal rights and ability to redeem stablecoins at par in fiat are protected at all times.<\/p>\n

The 2023 paper also floated the idea of introducing caps on stablecoin holdings, but the BoE didn\u2019t go into specifics about what those limits might be until last month\u2019s consultation paper on the proposed regulatory regime for SSCs.<\/p>\n

The bank said it will be taking responses to its consultation up until February 10, 2026, and that it was \u201ckeen to hear from a wide range of stakeholders, which includes community or charitable-focused organisations, the payments industry, businesses, and the general public.\u201d<\/p>\n

Back to the top \u2191<\/a><\/p>\n

Watch: Exchanging Bitcoin with Orange Gateway<\/p>\n

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