CryptoSlate
UK lawmakers are urging the Bank of England to revisit two cornerstones of its proposed stablecoin regime, a roughly $53 billion (£40 billion) issuance cap on pound-backed tokens and a 40% non-yielding cash reserve requirement, before the framework is finalized, warning the package could choke the domestic GBP stablecoin market before it begins.
Why it matters
The BoE's draft framework treats regulated stablecoins as a form of systemic payment money, on par with commercial bank deposits, rather than as a technology stack above the banking system. That stance forces issuers to back a large slice of float with sterile cash held at the central bank, which earns nothing and effectively prices pound stablecoins out of the yield-bearing USDT, USDC and EURC competition already circulating in the UK. Lawmakers argue the structural penalty means no UK bank, payment firm or fintech will bother minting a regulated pound token, leaving the country dependent on dollar- and euro-denominated stablecoins for its on-chain sterling activity.
Market impact
If the cap survives consultation, the practical ceiling is small relative to UK payment flows and would push compliant issuers offshore or into unregulated wrappers, undermining the very consumer-protection case the BoE is making. The reset window is narrow: the framework still needs to clear HM Treasury sign-off and a parliamentary reading before the BoE formally opens the licensing regime. A relaxation toward the 5% to 10% non-yielding buffer used by US and EU regimes would be the cleanest fix; the proposed 40% is what MPs are calling the breaking point.
Frequently asked questions
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What is the Bank of England's proposed cap on pound stablecoins?
The Bank of England's draft framework sets a ceiling of roughly $53 billion (£40 billion) on the issuance of pound-backed regulated stablecoins, alongside a 40% non-yielding cash reserve requirement that issuers must hold at the central bank.
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Why are UK lawmakers pushing back on the BoE's stablecoin rules?
Lawmakers argue the cap and the 40% non-yielding reserve buffer are structurally punitive, pricing regulated GBP stablecoins out of the market against USDT, USDC and EURC and leaving the UK dependent on dollar- and euro-denominated tokens for on-chain sterling activity.
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How does the BoE's 40% reserve requirement compare with US and EU rules?
The proposed UK buffer sits well above the roughly 5% to 10% non-yielding cash reserve share used in US and EU stablecoin regimes, which is the gap MPs are pointing to as the breaking point in the consultation.
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What happens if the proposed cap is not changed?
If the framework survives in its current form, compliant issuers are expected to move offshore or wrap themselves in unregulated structures, which lawmakers say would undermine the consumer-protection case the BoE is making.
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What is the next step for the UK's stablecoin regime?
The framework still requires HM Treasury sign-off and a parliamentary reading before the Bank of England formally opens the licensing regime for regulated pound stablecoins.
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