The Bank of England said it would dilute its proposed rules for stablecoins, amid a surge in the sector fuelled by pro-crypto regulations passed earlier this year in the US.
The central bank proposed on Monday that stablecoin issuers of widely used stablecoins could be allowed to invest up to 60 percent of their assets in government debt, but retained a cap on the amount of stablecoins that individuals and businesses can hold.
The US has this year embraced cryptocurrencies and stablecoins in particular, but critics say stablecoins, like other crypto tokens, present risks as they are privately issued assets and do not have the same protections as government currencies.
Profits
The crypto industry criticised a 2023 proposal by the BoE that would have forced issuers to hold all their assets in non interest-bearing accounts with the central bank, as issuers typically make profits by investing their holdings.
Crypto firms argue that they offer innovation that can make payments more convenient for users.
The bank plans to regulate only stablecoins that are classes as systemically important, with other tokens, such as those mainly used to buy crypto assets, being regulated under the Financial Conduct Authority.
It retained a proposed cap on stablecoin holdings of £20,000 for individuals and £10 million for businesses, although larger companies such as supermarkets or trading platforms can apply for exemptions.
‘Pivotal step’
It said the caps were considered temporary and would be lifted once there are no longer concerns around financial stability.
“Today’s proposals mark a pivotal step towards implementing the UK’s stablecoin regime next year,” said BoE deputy governor for financial stability Sarah Breeden.
The bank’s consultation runs through 10 February.
