UK MPs Warn Bank of England Stablecoin Caps Could Stifle Innovation
A cross-party group of UK MPs and peers has urged Chancellor Rachel Reeves and the Bank of England (BoE) to reconsider proposed rules for systemic stablecoins (SSCs). The BoE’s November consultation would cap individual holdings at £20,000 and business holdings at £10m, require up to 60% of backing assets to be held in short‑term government debt and force the remainder into non‑interest‑bearing BoE accounts. Signatories — including Lords Peter Cruddas, Emma Pidding and MPs such as Sir Gavin Williamson — say the measures risk driving activity offshore, deterring innovation and undermining the UK’s bid to be a digital asset hub. The BoE argues the rules target financial stability; consultation responses are open until 10 February 2026. The UK’s split regulatory model, which would give SSC oversight to the BoE while the FCA retains broader crypto rulemaking, remains unresolved as legislation is finalised. For traders: the proposals could change stablecoin flows and liquidity profiles, alter the on‑shore supply of sterling‑backed tokens, and increase counterparty and operational considerations for firms handling SSCs. Primary keywords: stablecoin regulation, Bank of England, systemic stablecoins. Secondary/semantic keywords: stablecoin caps, reserve requirements, digital asset hub, FCA, financial stability.
Neutral
The proposals target systemic stablecoins broadly rather than a single token, so direct price pressure on any one stablecoin is limited — hence a neutral market view. Short term: uncertainty and potential migration of issuance offshore could reduce on‑shore liquidity in sterling‑backed stablecoins, causing localized trading frictions for UK-based desks and platforms that rely on those tokens. That may temporarily widen spreads and increase funding costs for GBP stablecoin pairs. Long term: if measures are softened after lobbying, the market impact would be limited; if rules are enforced (caps + large BoE reserve holdings), issuance economics for sterling SSCs would worsen, reducing supply and on‑chain utility in the UK market and potentially pushing activity to other jurisdictions. Traders should monitor consultation outcomes, FCA/BoE legislative drafting, and issuer responses — these will determine whether effects remain operational/liquidity frictions (short term) or structural (long term).