The Bank of England (BOE) is reportedly softening its stance toward digital assets with a potential exemption to a controversial policy that would establish stricter stablecoin rules for the UK market.
BOE Plans Stablecoin Cap Exemption
On Tuesday, Bloomberg reported that the Bank of England is planning to grant exemptions to businesses in the UK from its proposed limit on stablecoin ownership, according to people familiar with the matter.
The central bank aims to grant waivers to certain digital asset firms that need to hold large amounts of stablecoins, like crypto exchanges. Additionally, the BOE intends to allow firms to use stablecoins as a settlement asset in its experimental Digital Securities Sandbox.
The changes to the sandbox will initially permit firms to adopt regulated stablecoins tied to non-sterling currencies for settlement purposes. This would allow the BOE to observe use cases for these digital assets while it evaluates its approach in more detail, said Bloomberg sources.
As reported by Bitcoinist, the central bank is exploring the restriction of stablecoin ownership in the country, imposing a limit of £10,000 to £20,000 for individuals and £10 million for businesses on all systemic stablecoins.
Notably, the BOE’s plan would reassemble its proposed approach to the digital pound, which aimed to address financial stability risks that deposits could flow out of the banking system.
BOE executive director for financial market infrastructure, Sasha Mills, previously stated that the limits would “mitigate financial stability risks stemming from large and rapid outflows of deposits from the banking sector (…) and risks posed by newly recognised systemic payment systems as they are scaling up.”
Some crypto industry and payment groups heavily criticized the central bank’s plan, arguing that it would be detrimental to the pound and put the UK at a disadvantage against the US and the European Union (EU).
Simon Jennings, executive director of the UK Cryptoasset Business Council trade body, considers that “limits simply don’t work in practice.” He explained that “stablecoin issuers don’t have sight of who holds their tokens at any given time, so enforcing caps would require a costly, complex new system, such as digital IDs or constant co-ordination between wallets.”
A Softer Crypto Stance?
According to Bloomberg’s sources, the restrictions are expected to be included in a consultation paper that will be published by the end of the year. The BoE previously said its proposed cap could be “transitional” while the financial system adjusts to the growth of digital money.
The report also noted that the potential exemptions could be seen as a shift from Governor Andrew Bailey’s skeptical perspective. Bailey has previously warned that stablecoins threaten to destabilize the public’s trust in money.
In August, former Chancellor and member of Coinbase’s advisory council, George Osborne, criticized the Bailey and the government’s approach to the crypto industry, arguing that it risks being “left behind” during the second wave of digital assets if it doesn’t “catch up.”
Osborne stated that authorities cannot continue to wait and evaluate the development of a digital revolution “reminiscent of Nigel Lawson’s Big Bang in the 1980s” while other financial capitals adopt comprehensive legislative frameworks for crypto asset platforms.
Nonetheless, the BOE Governor has recently shared a softer approach, affirming that it would be “wrong to be against stablecoins as a matter of principle” and noting that they have the potential to drive “innovation in payments systems both at home and across borders.”
