BoE eases stablecoin caps, allows sandbox settlement use

The Bank of England is preparing to soften planned limits on how much stablecoin currency firms and individuals can hold, with officials considering exemptions for businesses that need large holdings for trading and settlement, people familiar with the discussions said. The central bank is also expected to allow certain regulated stablecoins to be used as settlement assets within its Digital Securities Sandbox, a controlled testing environment for tokenised issuance and trading, ahead of a formal consultation later this year.

Under earlier proposals from the Bank of England and the Financial Conduct Authority, ownership caps would have restricted individuals to about 20,000 pounds and businesses to roughly 10 million pounds in widely used, or systemic, stablecoins. Regulators said the limits were intended to reduce risks to monetary policy and financial stability by preventing large-scale transfers of deposits into private digital tokens. Officials are now reportedly weighing waivers for crypto exchanges and other firms that cite operational needs to hold substantial stablecoin reserves for liquidity and settlement.

The revised approach would also permit firms in the Digital...