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The Bank of England just threw the stablecoin industry a lifeline, proposing new rules that could finally make widespread crypto adoption feasible in the U.K. after years of regulatory friction that threatened to push the sector offshore.
The central bank said on Nov. 10 it would allow stablecoin issuers to invest up to 60% of their backing assets in short-term government debt -- a dramatic reversal from its 2023 proposal that would have forced issuers to park all assets in non-interest-bearing accounts with the BoE itself.
That earlier approach drew sharp criticism from the crypto industry, which argued it would essentially kill any chance of UK stablecoin adoption by eliminating the profit model that makes these digital tokens economically viable. Stablecoins typically generate revenue by investing their backing assets while maintaining the token's peg to traditional currency.
What Changed -- And What Didn't
Under the updated proposal, only 40% of backing assets would need to sit with the BoE, giving issuers meaningful room to generate returns through government debt investments. The central bank also outlined a temporary regime allowing some issuers to invest up to 95% of their assets initially.
"Today's proposals mark a pivotal step towards implementing the UK's stablecoin regime next year," Sarah Breeden, BoE deputy governor for Financial Stability, said in the consultation paper. "We've listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England."
But the BoE held firm on one controversial element that sets it apart from U.S. and European Union regulators: caps on how much stablecoin individuals and businesses can hold. The bank proposed limits of £20,000 ($26,000) for individuals and £10 million for businesses, with exemptions available for larger enterprises like supermarkets or trading platforms.
The central bank stressed these caps are temporary and would be lifted once financial stability concerns ease.
Why This Matters for the Broader Crypto Market
Stablecoins have emerged as critical infrastructure for the booming crypto sector, offering traders and investors a way to move between volatile cryptocurrencies and stable digital dollars without leaving the blockchain. The sector received a major boost earlier this year when the U.S. established federal rules governing stablecoin issuance.