BoE Publishes Stablecoins Proposals

The Bank of England has published its proposed rules framework for stablecoins, taking a softer stance than its previously hard-line approach towards these digital tokens but stopping short of a full reversal.

The BoE’s proposals now allow issuers to hold as much as 60% of their reserves in short-term government debt, with some issuers potentially being able to have as much as 95% in gilts and bonds. The remaining assets will be required to be held at “unremunerated” accounts at the central bank, in a bid to ensure “robust redemption and public confidence, even under stress.

In a widely-criticised move the Bank kept its plans for limiting individual ownership of such tokens at £20,000 but it said it would allow crypto exchanges and some other industry players to hold as much as £10 million in stablecoins.

The Bank also floated the possibility of providing eligible and viable stablecoin issuers with a liquidity backstop facility and it also put the possibility of allowing access to central bank deposit accounts for some issuers.

The proposed rules would only apply to stablecoins that the Bank deems systemic, with smaller counterparts scheduled to be regulated by the FCA. The proposals build on feedback the Bank received in response to its November 2023 Discussion Paper and they “set out a regime that’s robust, future-proof, and aligned with the wider National Payments Vision and the Payments Vision Delivery Committee’s strategy to modernise UK retail payments,” the BoE says.