Plans by the Bank of England to soften proposed restrictions on stablecoins have been welcomed by industry leaders.
Stablecoins are a type of cryptocurrency designed to maintain a stable value, usually by being pegged to another asset such as the US dollar, gold or government bonds.
Unlike cryptocurrencies such as Bitcoin or Ethereum, which can swing wildly in price, stablecoins aim to remain close to a fixed value.
The Bank of England has confirmed it is looking to water down two of the more contentious elements of its proposed stablecoin framework – the holding caps and the 40 per cent non-interest-bearing reserve requirement – following significant industry pushback.
Mark Fairless (pictured), group CEO of ClearBank, said: “Stablecoins have the potential to meaningfully improve the speed and efficiency of payments and to support the next generation of financial services.
“A clear and workable regulatory framework will help ensure the UK remains an attractive environment for innovation and continues to strengthen its position as a leading global financial centre.
“We welcome the Bank of England’s decision to revisit its proposed approach to stablecoin regulation.
“This review creates a valuable opportunity to develop a proportionate, risk-based framework that protects financial stability while supporting innovation and healthy competition.
“Getting this balance right will be critical to sustaining the UK’s momentum in digital finance.”
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Derek Corcoran, CEO of Confirmo Limited (Ireland), which is regulated by the Central Bank of Ireland under MiCA, said: “The Bank of England’s willingness to revisit both the proposed holding caps and the 40 per cent non-interest-bearing reserve requirement is a positive signal.
“Frameworks that make stablecoin businesses commercially unworkable do not protect consumers — they simply push activity into less regulated environments and stifle innovation, which is the opposite of the intended effect.
“The broader goal should be to bring stablecoins into the same regulatory frameworks that govern equivalent traditional financial instruments, rather than creating a separate regime with no real parallel in conventional payments.
“This underlying tension is not unique to the UK. Regulators everywhere are trying to manage financial stability concerns without working against the payment infrastructure that consumers and businesses actually want to use.
“Getting that balance right takes time, and it is encouraging to see the Bank of England willing to do that work.”
Zumo founder and CEO Nick Jones said: “This is very welcome news and, encouragingly, it shows that UK policymakers are listening closely to the industry and are keen to work in tandem.
“By reconsidering plans to implement the proposed 40 per cent reserve requirement, as well as strict holding caps, the Bank of England is acknowledging valid industry concerns and seeking to revamp its framework to enable UK issuers to make inroads into the already heavily dollarised stablecoin market.
“This mirrors the FCA’s approach to regulating the wider digital assets sector. The regulator is taking the necessary time to consult with the industry, gather input and shape a comprehensive regulatory regime that works for all stakeholders.
“And while some may believe the pace of progress is too slow, there is an argument to be made that, by adopting such a considered approach, the UK will have firmer foundations from which to realise its stated ambition of becoming a genuine digital assets hub.”