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Bank of England ready to water down 'overly conservative' stablecoin proposals: FT
TL;DR
The Bank of England plans to relax restrictions on stablecoin holdings after feedback from the digital asset industry. Initial limits of £20,000 per coin were deemed 'overly conservative' by officials.
Key points
- Bank of England to ease stablecoin restrictions
- Initial limit of £20,000 per coin deemed overly conservative
- Stablecoins are pegged to traditional financial assets
Mentioned in this story
Bank of EnglandSarah Breeden
The Bank of England (BOE) is set to ease proposed restrictions on stablecoin holdings following pressure from digital asset industry participants, the Financial Times (FT) reported on Thursday.
Sarah Breeden, deputy governor for financial stability, said the central bank's initial plans to restrict individuals to owning up to 20,000 pounds ($27,000) per coin may have been "overly conservative," according to the FT.
The BOE is "looking very hard at whether there are different ways we can manage what we think is an important risk as stablecoins come into play," Breeden said in an interview.
Stablecoins are cryptocurrencies pegged to the value of a traditional financial asset, usually a fiat currency, mostly the U.S. dollar. They have been at the forefront of the development of mainstream digital asset adoption, helped by the establishment of formal regulatory regimes in some major jurisdictions.
The BOE's proposed restrictions risked preventing the U.K. from being competitive in the digital economy, crypto industry participants have said.
For its part, the central bank had described the proposed cap as "temporary."
"What we have heard from industry is that the way we have proposed to implement limits is cumbersome operationally for a temporary measure," Breeden said. "So we are genuinely open to thinking whether there are other ways of achieving our objective."
The BOE is also ready to lower its planned requirement that at least 40% of stablecoin-backing assets should be deposited with the central bank, earning no interest, and 60% invested in short-term U.K. government debt — requirements that were more restrictive than in markets such as the U.S.
"Not surprisingly, the industry would prefer to hold more interest-earning assets, as that goes to their bottom line," Breeden said.
"These are important signals from the Bank of England that it is prepared to revisit its stablecoin proposals," Katie Haries, Coinbase's head of policy for Europe said in an emailed comment. "We’ve said for a long time that a cap on stablecoin holdings is a cap on innovation, with real and significant risks for UK competitiveness."
The BOE did not immediately respond to CoinDesk's request for comment.
Q&A
What changes is the Bank of England making to stablecoin regulations?
The Bank of England is easing proposed restrictions on stablecoin holdings, particularly the limit of £20,000 per coin.
Why did the Bank of England consider its initial stablecoin proposals too conservative?
Officials, including Sarah Breeden, indicated that the initial limits might hinder the UK's competitiveness in the digital economy.
How do stablecoins function in the cryptocurrency market?
Stablecoins are cryptocurrencies pegged to traditional financial assets, primarily fiat currencies like the U.S. dollar, facilitating mainstream digital asset adoption.
