The Bank of England is reconsidering two core proposals for its sterling-backed stablecoin regulations following industry feedback. Concerns were raised that initial rules on corporate structure and the composition of backing assets were overly restrictive. The adjustment aims to balance financial stability with making the UK an attractive jurisdiction for digital asset innovation.
The Bank of England is re-examining at least two key pillars of its proposed regulations for sterling-backed stablecoins after industry players warned the initial draft was commercially unviable, Deputy Governor Sarah Breeden said.
"We are looking at alternatives," Breeden said in an interview with the Financial Times, acknowledging that the central bank had received significant feedback that its proposals could stifle innovation rather than foster a competitive UK market.
The two areas under review are the requirement for a stablecoin issuer to be a single, standalone corporate entity and the strict rules governing the composition of assets backing the coins. Financial firms argued the corporate structure rules were too rigid, while the asset requirements were more conservative than those for stablecoins backed by US Treasuries, limiting potential returns and use cases.
This potential pivot is critical for the UK's ambition to become a global crypto hub, signaling a willingness to create a pragmatic regulatory environment. The move comes as international bodies wrestle with creating global standards, a process BOE Governor Andrew Bailey has described as a potential "wrestle" with the US administration, which has been keen to promote dollar-backed stablecoins.
The feedback highlighted a potential disconnect between the central bank's goal of ensuring financial stability and the commercial realities of running a stablecoin business. The initial proposals were seen by some as creating a framework so safe that it would prevent any sterling-backed stablecoin from ever launching or competing effectively against established dollar-denominated giants like USDC or Tether (USDT).
By reconsidering the rules, the BOE is signaling that it is taking industry concerns seriously. The goal is to land on a final framework that can both prevent the kind of systemic risks seen with past stablecoin failures and allow for a functioning, innovative market to develop within the UK.
The UK's regulatory path for stablecoins is being closely watched on the international stage. The European Union has already implemented its comprehensive Markets in Crypto-Assets (MiCA) regulation, setting a high bar for consumer protection and issuer requirements. In contrast, the United States has taken a more fragmented approach, though the promotion of stablecoins backed by US government debt remains a priority.
The BOE's willingness to adjust its stance reflects the delicate balance regulators must strike. A framework that is too lax risks financial instability, while one that is too strict could push innovation and capital to other jurisdictions. Existing asset-backed tokens, such as the gold-backed PAX Gold (PAXG), which currently trades around $4,648, already operate in a multi-billion dollar global market, illustrating the complexity of regulating digital assets tied to real-world commodities. The final UK rules will be a key indicator of where London hopes to position itself in the evolving global digital asset landscape.
This article is for informational purposes only and does not constitute investment advice.
