UK eases rules on regulating stablecoins

Key points:

• The Bank of England is prepared to ease regulations and permit select crypto exchanges and fintech companies to maintain substantial reserves of stablecoins for settlement and liquidity purposes.
• The central bank also plans to integrate stablecoins into the Digital Securities Sandbox, a regulated blockchain platform for financial testing.
• BoE Governor Andrew Bailey has revised his stance on digital assets, stating his willingness to safely manage innovation so that the UK does not fall behind the US and EU in the fintech sphere.

According to a Bloomberg report, the Bank of England (BoE) is preparing to grant exemptions to certain companies, including crypto exchanges and fintech companies, that require large reserves of stablecoins to ensure liquidity and conduct settlements.

The central bank is also exploring ways to integrate stablecoins into its Digital Securities Sandbox, a pilot blockchain program for financial testing in a regulated environment.

Easing of stance on stablecoin regulation in the UK

Previously, both the Bank of England and the Financial Conduct Authority (FCA) had proposed strict restrictions: 20 000 sterling pounds ($26 800) for individuals and 10 million sterling pounds ($13,3 million) for businesses, on assets of so-called “systemic” stablecoins used for payments.

Industry experts warned that such restrictions could drive innovation and liquidity away from London, directing the industry’s development to the US or the EU, where conditions for stablecoin issuers are already more lenient.

The Bank of England’s change of heart on stablecoins

Bank Governor Andrew Bailey, previously known as one of the most skeptical critics of stablecoins, has also softened his stance. He had previously stated that such assets could “undermine confidence in money,” advocating for tokenized bank deposits as a safer alternative.

Now, Bailey talks about the need to find a balance between innovation and security:

“We have to recognize that innovation in payments will not stop at the edge of traditional banking — the goal is to manage that innovation safely.”

This transition is taking place against a backdrop of intensifying global competition. The US, in accordance with the GENIUS Act passed by Donald Trump, has already introduced clear rules for dollar-backed stablecoins, and the European Union already has the MiCA mechanism in place. If the UK continues to delay, it risks losing its position as the world’s leading fintech hub.