UK MPs Demand Revisions to BoE Stablecoin Rules to Protect London’s Edge
A cross-party group of UK MPs and peers has urged Chancellor Rachel Reeves to revise the Bank of England’s draft stablecoin regime, warning that proposed limits could stifle innovation and drive issuance offshore. Key concerns include a proposed individual holding cap (up to £20,000 in earlier drafts), restrictions on wholesale uses, a ban on interest-bearing reserves, and strict reserve-location and composition rules (large shares in unremunerated central bank deposits and short-term UK government debt). Lawmakers argue these measures could weaken London’s appeal as a global financial centre and shift activity toward dollar-pegged stablecoins and foreign markets. The Treasury says it wants the UK to lead in digital assets and will work with the BoE; the FCA has prioritised stablecoin payments and plans to advance UK-issued sterling stablecoins in 2026. For crypto traders: heightened policy uncertainty and a potentially restrictive UK framework may push stablecoin issuance and liquidity offshore, reduce adoption of pound-denominated stablecoins, and change onshore demand for GBP-linked crypto products. Primary keywords: stablecoin regulation, Bank of England, UK crypto policy. Secondary/semantic keywords: stablecoin holdings cap, sterling stablecoin, reserve composition, FCA, Treasury, fintech growth.
Neutral
The news is neutral for crypto markets overall but carries mixed implications for pound-pegged stablecoins specifically. On one hand, proposals that cap holdings, restrict wholesale use and require conservative reserve composition increase regulatory risk and could reduce demand for GBP-denominated stablecoins — a bearish influence on products tied to sterling liquidity. That could shift issuance and liquidity offshore, compressing onshore supply and trading volume for GBP-linked instruments in the short term. On the other hand, Treasury and FCA statements that the UK wants to lead in digital assets and will continue cooperating with the BoE signal regulatory engagement rather than outright prohibition; this leaves room for revised, more industry-friendly rules. If the government pushes back on the most restrictive BoE proposals, long-term outcomes could be neutral-to-positive for UK stablecoin markets and fintech growth. Traders should monitor policymaker responses and consultation outcomes: a tough final framework is likely bearish for pound stablecoin liquidity, whereas a softened regime or clear road to UK-issued sterling stablecoins (as signalled for 2026) would be neutral-to-bullish. Overall market price impact across major crypto assets is limited; primary effects would be on GBP-linked stablecoins and related onshore liquidity.