Bank of England Proposes Stablecoin Regulations

The Bank of England released a consultation paper on Monday outlining a proposed regulatory framework for sterling-denominated systemic stablecoins, digital tokens widely used in payments that could affect UK financial stability. The measures, aimed at issuers of these assets, include temporary holding limits and strict backing requirements to safeguard the banking system during a transitional period.

Under the proposals, stablecoin issuers would face per-coin holding caps of 20,000 pounds for individuals and 10 million pounds for businesses, with exemptions available for businesses requiring higher balances for operational needs. These limits, described by Bank officials as temporary, are intended to curb potential rapid outflows from commercial bank deposits that might disrupt credit availability. Deputy Governor Sarah Breeden stated that the restrictions would be lifted once the risks to the economy subside. The framework targets only systemic stablecoins, determined as such by His Majesty's Treasury, and would involve joint supervision: the Bank of England handling prudential oversight and the Financial Conduct Authority focusing on consumer protection.