UK central bank still ‘disproportionately cautious’ about stablecoins
News Summary
The Bank of England (BOE) has released its proposed regulatory regime for stablecoins, which, despite incorporating feedback from the crypto industry, is still deemed overly restrictive by some observers. The consultation paper was published on November 10, two years after its initial discussion paper. While some stricter requirements have been removed, industry figures like Tom Rhodes, Chief Legal Officer at Agant, argue that the BOE remains “disproportionately cautious and restrictive.” One controversial restriction in the paper is the proposed cap on "systemic retail stablecoins," limiting individuals to £20,000 and businesses to £10 million. While the BOE aims to protect financial stability and prevent deposits from leaving the banking system, the crypto community has expressed dissatisfaction. Industry representatives also highlight the practical difficulties in enforcing these caps and the slow pace of UK regulatory progress, which could push businesses offshore. Nevertheless, some believe the BOE's approach is pragmatic and fair, emphasizing that tokens functioning as money require money-grade controls.
Background
The Bank of England has been developing a regulatory framework for stablecoins since 2023, releasing a new consultation paper on November 10, 2025, two years after its initial discussion paper. The original paper was criticized by industry players for potentially stifling the UK's digital asset space. The UK government has been working on crypto regulations since 2017, starting with Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for crypto businesses, but overall progress has been slow. Stablecoins, cryptocurrencies designed to maintain a stable value pegged to fiat currency or other stable assets, are under increasing scrutiny globally by central banks and regulators to assess their potential impact on financial stability, monetary sovereignty, and consumer protection.
In-Depth AI Insights
What are the underlying strategic considerations driving the Bank of England's persistent caution on stablecoins? - Protection of the traditional banking system's deposit base and credit creation capacity, which is central to its financial stability mandate. - Maintenance of monetary policy effectiveness and national monetary sovereignty, preventing widespread private stablecoin adoption from eroding central bank control. - Reserving future space and competitive advantage for a potential Central Bank Digital Currency (CBDC), such as a digital pound, ensuring its primacy in the digital payments landscape. How might these “disproportionately cautious” regulations impact the UK's competitiveness in the global crypto landscape? - Risk of innovation and talent flight: Strict limitations and slow approval processes will likely push stablecoin issuers and developers towards jurisdictions with clearer and more accommodating regulatory environments. - Hindered domestic market development: Caps on "systemic retail stablecoins," even if exempting most existing ones, signal resistance to mass adoption, deterring the growth of a native UK stablecoin ecosystem. - Diminished UK fintech hub appeal: Regulatory uncertainty and delays place the UK at a disadvantage in competing with other nations (e.g., EU, Switzerland, Singapore) for leadership in digital assets. Given the global and decentralized nature of stablecoins, what are the realistic implications for the effectiveness and long-term impact of these retail holding caps? - Significant enforcement challenges: Users can acquire stablecoins through unregulated offshore platforms or peer-to-peer transactions, making caps set for individual issuers difficult to monitor and enforce effectively. - Potential shift towards privacy coins and permissionless chains: If users perceive excessive restrictions, they may migrate to harder-to-track privacy coins or fully decentralized financial protocols, paradoxically increasing regulatory complexity. - Likely future regulatory adjustments: If these restrictions prove ineffective in achieving financial stability goals while significantly stifling innovation, the BOE may be compelled to re-evaluate or relax its stance in the future to adapt to market realities and global trends.