Bank of England Considers Exemptions for Stablecoin Holding Limits Amid Industry Pressure

According to Cointelegraph, the Bank of England (BOE) is reconsidering its proposed limits on corporate stablecoin holdings, potentially introducing exemptions for certain firms that require larger reserves of fiat-pegged assets. This shift comes in response to significant industry backlash and increasing international competition, particularly from the United States, which is advancing towards clearer regulation through the GENIUS Act, enacted in July. Initially, the BOE suggested caps on stablecoin holdings—20,000 pounds for individuals and 10 million pounds for companies—citing concerns over systemic risks from widely used tokens like USDt (USDT) and USDC (USDC). These restrictions aimed to help the central bank maintain control over the money supply, protect consumers, and prevent excessive reliance on privately issued digital currencies. However, while these limits might be feasible for traditional businesses, crypto-native companies argue that such caps could hinder their operations, given their need to hold substantial stablecoin reserves for trading and liquidity management. Consequently, the BOE is considering exemptions for these firms. Simon Jennings of the UK Cryptoasset Business Council has criticized the proposed stablecoin limits, stating they "simply don’t work in practice." BOE Governor Andrew Bailey had previously warned about the potential threats posed by privately issued stablecoins to financial stability and monetary policy. However, in recent remarks, Bailey acknowledged that stablecoins might represent a useful innovation capable of coexisting within the broader financial system. This evolving stance underscores the UK's ongoing effort to balance financial stability with competitiveness in the rapidly growing stablecoin sector, an area where some critics argue the country has been slower to act compared to peers like the US and the European Union. The global stablecoin market has surged to a valuation of approximately $314 billion, with most tokens pegged to the US dollar. In contrast, pound-pegged stablecoins remain a minor fraction of the market, with less than $1 million in total circulation, according to DefiLlama data cited by Bloomberg. Despite the UK's cautious approach and concerns over market risk, Tether co-founder Reeve Collins believes it is only a matter of time before all fiat currencies exist in stablecoin form, potentially by 2030. Collins suggests that stablecoins are poised for widespread adoption due to their ease of use and their role in supporting the growth of tokenized assets, a sector increasingly attracting traditional financial capital.