Bank of England plans exemptions to its controversial limits on stablecoin holdings

By Hannah Perez

The U.K. central bank plans to grant exemptions to proposed stablecoin holding limits for certain businesses, such as cryptocurrency exchanges, according to Bloomberg.

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• The UK central bank plans exemptions to stablecoin holding limits.
• They would apply to certain companies such as cryptocurrency exchanges, according to Bloomberg.
• It imposed a cap of up to USD $26,800 for individuals and USD $13.4 million for companies.
• The measure seeks to address competitiveness in the face of favorable regulatory changes in countries like the United States.

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The Bank of England (BoE) will introduce exemptions to its controversial proposed limits on corporate holdings of stablecoinsin response to the strong rejection of the crypto sector, which warns of a possible flight of talent and investment to the United States, where friendly rules already exist for this asset class.

According to a report by Bloombergwhich cites a person familiar with the matter, these measures seek to balance innovation with financial stability, amid growing global competition to regulate these digital assets.

The stablecoinsdigital tokens linked to traditional assets, often fiat currencies such as the US dollar, are positioned as faster and cheaper alternatives to conventional payment systems. Bloomberg Intelligence estimates they could process more than $50 trillion in annual transactions by 2030. However, the BoE has expressed reservations about its impact on public confidence in money, although it has recently moderated its stance.

Background to the proposals and industry rejection

Last month, the BoE outlined strict limits in a regulatory consultation expected by the end of the year. The rule imposes a cap of up to 20,000 pounds (USD $26,800) for individuals and 10 million pounds (USD $13.4 million) for companies. This measure generated a wave of criticism from industry players who described the limits as “inapplicable” and detrimental to the UK’s competitiveness.

The governor of the BoE, Andrew Bailey, had warned in July that the stablecoins threaten financial stability and advised global banks against developing them. However, in an opinion article in the Financial Times Last week, Bailey adopted a more conciliatory tone, saying that ““It would be wrong to oppose them on principle, recognizing their potential to drive innovation in both national and cross-border payment systems.”

“However, practice matters, and it is critical that these stablecoins meet conditions that guarantee public trust.”“he added.

Crypto industry leaders, such as Sean Kiernan, CEO of Greengagea British firm, have been vocal. “The United States already has a live framework for stablecoins, giving issuers the certainty to build and scale. If the UK falters another year, liquidity, talent and investment will flow to New York instead of London“Kiernan said.

The Trump administration this year passed the GENIUS Act, a framework for stablecoins backed by dollars that strengthens the demand for Treasury bonds. Hong Kong, for its part, implemented rules for these assets in August, while the EU already regulates the market with its broad framework of laws for cryptocurrencies, MiCA.

Exemption details

To mitigate these concerns, the BoE will grant exemptions to companies that need to handle large volumes of stablecoinslike crypto exchanges. In addition, it will allow its use as a liquidation asset in the Digital Securities Sandboxan experimental environment for digital securities, initially with stablecoins regulated in non-sterling currencies.

The bank will also review its initial proposals to authorize stablecoins Systemic banks—used in large-scale retail payments—keep part of their reserves in high-quality instruments, such as short-term government bonds.

As an alternative, the BoE and UK Finance are promoting tokenized deposits—digital claims on commercial banks based on Blockchain— that reduce fraud and speed up transactions.

Implications for the crypto sector in the UK

These exemptions mark a significant shift towards a more open stance, allowing the BoE to observe real cases of stablecoins in wholesale applications through its Sandbox. However, the British regulatory lag compared to jurisdictions such as the US and Asia could lose ground in innovation and investment attraction.

The market of stablecoins is currently dominated by more than 90% by assets linked to the US dollar, with more than USD $300 billion in circulation where only USD $581,000 are tokens tied to the pound, according to data from DefiLlama.

With the consultation pending for December, the sector hopes that these measures will prevent London from losing its fintech pulse to New York, consolidating the stablecoins as a bridge between traditional and digital finance.

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Article written with the help of AI, edited by DailyBitcoin

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