BoE signals flexibility on stablecoin holdings amid industry pushback
BoE stablecoin caps appear set for a rethink after a Bloomberg report on 7 October 2025, as the Bank of England signals potential, targeted exemptions — a shift that could reshape the UK’s approach to digital money and market liquidity.
Why is the Bank of England changing course on stablecoins and regulation?
Bloomberg reporter Sam Bourgi says the BoE is weighing carve‑outs after industry push‑back. Officials told Bloomberg they may exempt firms that need larger holdings for trading or market‑making. In this context, the bank is balancing prudential risk with the goal of keeping the City competitive. It should be noted that details remain under negotiation.
What were the proposed caps and how would corporate stablecoin exemptions work?
Initial proposals suggested caps of up to £20,000 for individuals and roughly £10 million for companies on widely used, systemic stablecoins. However, the BoE is now said to be open to exemptions for firms that can justify bigger reserves. Industry groups argue these carve‑outs are essential for exchanges, market‑makers and payment firms. That argument appears central to the current review.
- Proposed caps: up to £20,000 (individuals) and ~£10m (companies).
- Bloomberg reported the carve‑outs; full details remain under negotiation.
- Stablecoin market size: about $314 billion.
- Pound‑pegged stablecoins reportedly account for under $1m in combined supply, per DefiLlama cited by Bloomberg.
How would relaxations affect stablecoin liquidity management and pound‑pegged stablecoins in the market?
Firms say caps as drafted could hamper normal liquidity operations. Market‑making desks rely on sizable positions in tokens such as USDT to hedge and settle flows. A calibrated exemption regime would acknowledge those operational needs while limiting household exposure. In this light, regulators must balance resilience with functionality.
Moreover, the risk profile of small, niche pound‑pegged stablecoins appears limited. Bloomberg notes many GBP‑pegged tokens have tiny market caps, which complicates a systemic‑risk rationale for broad limits.
What are industry reactions — and what did Reeve Collins and Simon Jennings say about exchanges?
At Token2049, Tether co‑founder Reeve Collins argued digital money will keep expanding, underscoring the industry’s need for workable rules. Meanwhile, Simon Jennings of the UK Cryptoasset Business Council warned caps could push activity offshore and harm the UK’s fintech ecosystem. Those voices, plus lobbying from exchanges and payment firms, appear to have nudged the BoE toward flexibility.
How does the U.S. legal push shape the debate on UK stablecoin regulation?
International developments matter. The United States is advancing legislation and regulatory discussion to clarify how payment stablecoins will be treated. Consequently, UK policymakers face pressure to design rules that protect consumers yet do not leave Britain trailing larger markets. In this context, comparators abroad influence domestic choices.
Why should investors and institutions care about these changes?
For traders and institutional treasury desks, even modest caps can affect hedging costs and intraday funding. For investors, the debate raises questions about where innovation will cluster. Put differently: will regulatory tightness drive liquidity to New York or Singapore, or will London keep its place as a payments and fintech hub?
Central bankers, including Governor Andrew Bailey, have signalled openness to regulating widely‑used stablecoins as money, while also reluctant to block adoption outright. The emerging compromise — targeted exemptions paired with stronger oversight — may offer a pragmatic way forward.
From an editor’s and trading‑desk perspective, a credible exemption regime needs precise eligibility criteria, advance notice and routine stress testing. Firms should document intraday funding use and market‑making justification to qualify for carve‑outs. As the Bank of England put it, “The concept at the heart of money is trust,” a reminder that innovation must preserve reliability. See Bank of England policy context here: Bank of England
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