Weakening the UK’s stablecoin rules could threaten financial stability and trigger a credit crunch, according to Bank of England Deputy Governor Sarah Breeden.
“There are a different set of risks that we have to manage as we move into introducing this new form of funding,” Breedens told Reuters on Tuesday. He said last week that the UK could align with the US on stablecoin regulation.
Crypto industry leaders have criticized the BOE’s stablecoin consultation document released on Monday, which proposes a relatively strict stance on stablecoin regulation compared to the United States.
One of the biggest criticisms has been the BOE’s decision to maintain its controversial stablecoin proposal, which limits stablecoin holdings to 10,000 British pounds ($26,300) for individuals and 10 million British pounds ($13.1 million) for most companies.
Breeden said this would “halve the stress” on banks and credit creation caused by customers withdrawing bank deposits to buy stablecoins. He did not say when the measures might be lifted.
sauce: cointelegraph
Stablecoins are rapidly growing to be a $312 billion market by 2025, and countries around the world are looking to follow the lead of the GENIUS Act signed by US President Donald Trump earlier this year and enact similar legislation that balances industry innovation with consumer protection.
In September, British Prime Minister Rachel Reeves and US Treasury Secretary Scott Bessent met, and the two countries agreed to strengthen cooperation on cryptocurrency and stablecoin activities, increasing the UK’s regulatory momentum.
Breeden claims Circle v. SVB case justifies 40% support rule
The UK’s top bank has also proposed measures that would require stablecoin issuers to hold 40% of the assets backing their tokens with the BOE without earning interest.
Breeden said the suggestion was baseless, pointing to USDC’s (USDC) temporary depegging in March 2023, when Circle’s roughly $3.3 billion in reserves were held in a now-failed Silicon Valley bank.
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The BOE said it is open to further feedback and plans to finalize the scheme next year.
The authority plans to regulate stablecoins used for everyday payments, while the Financial Conduct Authority plans to regulate stablecoins used in crypto trading.
Meanwhile, Coinbase and BVNK, one of the UK’s most prominent stablecoin companies, agreed to part ways on Tuesday in a $2 billion deal that could boost stablecoin adoption in the UK.
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