The Bank of England (BoE) has warned that easing its proposed stablecoin rules could make the UK’s financial system less stable and possibly limit lending.
Deputy Governor Sarah Breeden said that moving toward stablecoins introduces new risks that require careful oversight.
Speaking to Reuters, she noted, “We have a different set of risks to manage as we transition to bringing in this new form of money”.
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The BoE’s consultation paper, released on November 10, has criticized parts of the crypto industry. Many industry groups noted that the plan is tougher than what is being developed in the United States.
One major complaint concerns the proposed limits on the amount of stablecoin people and companies can hold. The BoE suggested a cap of 10,000 pounds (about $26,300) for individuals and 10 million pounds (around $13.1 million) for most firms.
Breeden explained that these limits would reduce pressure on banks caused by people moving their deposits into digital tokens. She said the rule could “halve the stress” on banks and credit creation, but did not mention when it might be lifted.
The plan also includes new requirements for stablecoin issuers. They would need to keep 40% of the reserves backing their tokens at the Bank of England and would not earn interest on those funds.
The BoE recently announced plans to introduce stablecoin regulations on a similar schedule to the United States. What did Breeden say? Read the full story.
