**Bank of England Proposes Regulatory Regime for Stablecoins Amid Industry Concerns**
The UK’s central bank, the Bank of England (BOE), has released a proposed regulatory regime for stablecoins. This consultation paper reflects input from the crypto industry, although some observers still consider it restrictive. The BOE published the document on November 10, two years after announcing its initial discussion paper. That original paper presented a vision for crypto that many in the industry believed would hamper the UK’s digital asset space.
The BOE stated it received comments and feedback from a diverse group of 46 stakeholders, including banks, non-bank payment service providers, payment system operators, trade associations, academia, and individuals. While the central bank appears to have dropped some of its more hardline requirements, certain industry voices feel the changes do not go far enough.
Tom Rhodes, Chief Legal Officer at UK-based stablecoin issuer Agant, described the BOE as remaining “disproportionately cautious and restrictive” despite some progress.
### Improvements and Innovations in the New Proposals
Rhodes told *Cointelegraph* that the new iteration features several improvements over the 2023 version. “The latest proposals include some innovative features, such as direct BOE liquidity lines and the ability to repo reserves for liquidity purposes,” he explained.
He added that for the UK market, “these proposals can be further explored and potentially expanded to create a more competitive backing asset regime, without compromising on stability.”
However, even with these advancements, Rhodes noted that the BOE has been “unusually vocal about the perceived risks of stablecoins.”
### Controversial Limits on “Systemic Retail Stablecoins”
One of the more contentious aspects of the consultation paper is the proposed limits on what the BOE calls a “systemic retail stablecoin.” The paper defines these as stablecoins “widely used by individuals to make everyday payments such as shopping and receiving salaries.”
The central bank proposes limits of £20,000 for individuals and £10 million for businesses accepting stablecoins as payment. While these figures are higher than the initial proposal, the idea of capping crypto holdings has drawn criticism.
Crypto influencer Aleksandra Huk tweeted: “Bank of England wants to cap stablecoin holdings at £20,000. Who gave them the right to tell us what to buy, where to store our money, and how much we can have? Honestly, this is the best advert ever for privacy coins and for leaving the UK.”
### Clarifications and Scope of the Limits
There are some caveats to the proposed rule. Geoff Richards, Head of Community at the Ontology Network, pointed out: “The proposal applies only to sterling-denominated stablecoins used in UK payment systems that could become ‘systemic.’ Not USDT, not USDC, not random DeFi tokens.”
Ian Taylor, board member of crypto industry group CryptoUK, told *Cointelegraph* he understands the BOE’s cautious stance, especially regarding stablecoin limits. “The Bank of England has a mandate to protect financial stability. And that stability is closely tied to the banking system,” he said.
Taylor explained that since banks create credit by taking deposits and issuing loans, stablecoins siphoning deposits out of banks could reduce banks’ lending capacity—something that threatens financial stability. “That’s why they want to baby-step this,” he added.
Rhodes noted that the “vast majority” of UK stablecoins will not fall under the BOE’s systemic regime. He referenced Mastercard’s recognition as a systemically important payment system only in 2021 and said non-systemic stablecoins will fall under the Financial Conduct Authority’s (FCA) less restrictive ruleset.
### Industry Calls for Further Clarity and Speed
Access to central bank liquidity and deposit accounts at the BOE was a welcome update for stablecoin issuers. Still, representatives from the crypto industry believe there is room for improvement in the central bank’s plan.
Regarding stablecoin caps, Rhodes said, “The systemic thresholds remain uncertain.” He emphasized the need for clearer guidance from His Majesty’s Treasury to indicate when an issuer’s scale poses a risk to the UK economy and thus warrants systemic classification.
Taylor highlighted challenges in enforcing these caps. When a government licenses an issuer, it is their responsibility to monitor how many stablecoins have been distributed to each client—whether wholesale, corporate, or retail. But many individuals obtain stablecoins through secondary markets, peer-to-peer transactions, or even as salary compensation, complicating enforcement.
“The actual operational enforcement of that I question, and we’ve seen no detail regarding how that will be managed,” Taylor said.
Arvin Abraham, Partner at Goodwin Procter, told *Cointelegraph* that “clarity and speed” will be key to making the UK’s stablecoin ecosystem more competitive. Regulators should provide issuers “a clean runway and predictable timelines” to navigate the approval process.
Unfortunately, regulatory progress in the UK has been slow. The British government began working on crypto regulations in 2017, when it first adopted Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements for crypto-related businesses such as exchanges.
Now, eight years later, the BOE is still refining policies based on industry feedback. This sluggish pace is problematic, Taylor said: “We’ve been consulting on a wider framework to regulate stablecoins for almost five years, and we still haven’t gotten any actual licensing framework in place.”
Without clear regulations, “businesses wanting to launch stablecoins in the UK don’t have a roadmap of how to do that,” he noted. Consequently, many companies opt to relocate offshore to jurisdictions with established regulatory frameworks.
Several factors contribute to this delay, including repeated government changes and a lack of “real champions” among key stakeholders such as the government, Treasury, and FCA.
### Pragmatic Yet Restrictive Approach by the Bank
Despite criticisms, Abraham sees the BOE’s approach as pragmatic and fair. “The overriding message is that innovation is welcome, but if you want your token to function like money, you need money-grade controls,” he said.
While progress may come more slowly than many in the crypto industry would prefer, the BOE’s ongoing efforts represent an important step toward establishing a stable and secure UK stablecoin market.
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*Related: UK crypto hopes stall, but ‘encouraging signs’ are there*
https://bitcoinethereumnews.com/tech/bank-of-england-still-disproportionately-cautious-on-stablecoins/
