UK central bank seeks to clarify stablecoin regulation…considers limits on holdings

The UK central bank is pushing to clarify stablecoin regulation.

The UK's central bank, the Bank of England (BoE), said in a report on the 10th (local time) that "innovation in money and payments, including the growth of stablecoins, is accelerating," and that "using regulated stablecoins can enable faster and cheaper retail and wholesale payments domestically and internationally." The Bank of England said, "We are designing a stablecoin regulatory framework fit for the future," and "we will support the role of stablecoins as part of a 'multi-money' system alongside commercial bank money."

The Bank of England proposed that stablecoin issuers could hold up to 60% of reserves in pound sterling short-term government bonds. Under the proposal, stablecoin issuers would be required to keep 40% of reserves as interest-free deposits at the Bank of England. The Bank of England said, "The purpose of the proposal is to ensure that systemically important stablecoin issuers have sufficient liquidity to cope with large, unexpected redemption requests," and "without such measures, stablecoin issuers risk being unable to respond quickly to redemption demands."

The report also included a measure to limit stablecoin holdings per person. Specifically, the Bank of England proposed limiting holdings for individuals and firms to 20,000 pounds and 10,000,000 pounds per token, respectively. The Bank of England said, "The introduction of holding limits should be balanced against other considerations, such as the potential impact on stablecoin utility and innovation," and "we believe that applying the proposed per-token holding limits would allow stablecoins to be used consistently for most retail payments."

Meanwhile, the Bank of England plans to finalize stablecoin regulation by next year. The Bank of England said, "We will review a range of views before finalizing regulations next year."