A cross-party group of UK lawmakers have expressed concerns about a Bank of England (BOE) proposal to limit stablecoin holdings in the country, urging Chancellor Rachel Reeves to reverse the controversial policy.
UK lawmakers oppose stablecoin cap plans
On Thursday, a coalition of UK lawmakers sent a letter asking Chancellor Rachel Reeves to oppose some of the Bank of England’s stablecoin policies that could undermine the government’s efforts to position the UK as one of the leading countries in the digital asset industry.
In the letter reviewed by Bloomberg, members of the House of Lords, House of Commons and Peers highlighted how stablecoins are reshaping financial infrastructure by lowering costs, accelerating settlements, and promoting financial inclusion.
“Their rise also enables traditional institutions to connect with the digital asset ecosystem and modernize legacy infrastructure,” the report noted. “Strong tailwinds are rapidly driving a major transformation across financial services as we know them.”
However, they argued that the Bank of England’s proposal to cap stablecoin ownership could “risk preventing the UK from taking full advantage of these opportunities”, pushing innovation abroad and investors to alternatives linked to the US dollar, while potentially positioning the UK as a “global outlier”.
“We are deeply concerned that the UK is drifting toward a fragmented and restrictive approach that will deter innovation, limit adoption, and drive activity offshore,” the coalition wrote in the letter.
As reported by Bitcoinist, the Bank of England issued a new consultation paper on its proposed regulatory framework for sterling-denominated systemic stablecoins in November. The proposed rules, based on comments in a November 2023 discussion paper, addressed support rules and retention limits.
Among the controversial policies, the bank proposed a temporary limit on ownership of stablecoins “to mitigate financial stability risks caused by large and rapid outflows of deposits from the banking sector.”
The restriction would impose limits of between £10,000 and £20,000 for individuals and £10 million for businesses, which is similar to the approach proposed for the digital pound, which also aims to address financial stability risks.
MPs describe the Bank of England’s policies as a “own target”
In a statement to Bloomberg, a Treasury spokesperson said they “want the UK to be a global leader in digital assets, providing certainty for businesses and enhancing consumer confidence by bringing crypto assets under regulation.”
“Our approach will be fair and proportionate, and we will continue to work closely with the Bank of England on the UK’s approach to stablecoins,” the spokesperson stressed, adding that “their recent consultations provide an invaluable opportunity for stakeholders to provide their views.”
Earlier this week, the Financial Conduct Authority (FCA) stated that stablecoin payments would be a priority for next year. In a letter sent to the Prime Minister on Tuesday, the regulator pledged to “finalize the rules for digital assets and progress on sterling stablecoins issued in the UK” in 2026.
However, the report noted that the general perception among regulators and market participants is that the UK is lagging behind other jurisdictions, including the US, which introduced a comprehensive regulatory framework for stablecoins in July.
It is worth noting that the Bank of England has proposed that issuers of systemic stablecoins be required to hold at least 40% of the reserves backing the currency as non-reward deposits at the central bank to ensure “strong recovery and public confidence, even under pressure.” At the same time, issuers will be allowed to hold up to 60% of backing assets in short-term UK government debt.
Lawmakers consider the requirement to hold all reserves backing tokens linked to the UK pound as a “massive private goal” that would limit the importance of sterling. “For the UK to remain globally competitive, it must ensure its stablecoin framework compares with leading international models,” the lawmakers concluded.
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