BoE Proposes £20,000 Cap in Pioneering Stablecoin Regulation
The Bank of England has launched a landmark stablecoin regulation consultation, proposing to treat GBP-backed stablecoins as e-money tokens for retail payments up to £20,000. Under the draft rules, issuers would need an e-money license, maintain 1:1 fiat reserves, guarantee redemption on demand and comply with AML/KYC requirements. Transactions above £20,000 would fall outside e-money rules and face additional oversight. Developed in coordination with the FCA, the framework aims to safeguard financial stability, protect consumers and foster innovation in crypto payments. The consultation runs until January 2024 and will shape the final e-money regulation. By introducing clear stablecoin regulation, the BoE seeks to align with global standards like the EU’s MiCA, enhance market confidence and support the growth of digital payment solutions.
Neutral
The BoE’s move to introduce comprehensive stablecoin regulation offers much-needed clarity, reducing legal uncertainty for issuers, merchants and traders. Similar frameworks like the EU’s MiCA have boosted institutional adoption and market confidence in digital assets. However, the £20,000 transaction cap may constrain high-value transfers and trading volumes in the short term. Overall, the balance of consumer protection, AML safeguards and licensing requirements is likely to maintain market stability without dramatically spurring or stifling growth, resulting in a neutral outlook. In the long term, clearer rules should support steady innovation and wider adoption of crypto payments.