Regulation Details and Exemptions

On Monday,November 6,2023,the Bank of England announced plans to impose ⁤ownership limits on UK stablecoins deemed systemically important. Individuals will be ⁣limited to holding up ⁢to £20,000 worth of ⁢these stablecoins, while most businesses will face a £10 million cap. However, the BoE will exempt‍ certain entities from the business limit.

Specifically, retail businesses – such as supermarkets – and intermediaries serving retail customers, like cryptoasset trading platforms,​ may be allowed to hold larger balances of‌ stablecoins, according to a consultation paper ​released by the BoE.

What are Stablecoins?

Stablecoins are digital tokens⁣ designed to⁢ maintain a stable value relative ⁢to a specific asset, typically a fiat currency like the US dollar or the British⁢ pound. They are pegged at ⁢a ⁤one-to-one rate with the underlying currency. As a cornerstone of cryptocurrency trading,stablecoins have become a focal ‌point for regulatory debate,as noted by the Financial ⁣Times.

BoE Support and Backing Asset Requirements

The BoE is ⁣also exploring‌ measures to support systemic stablecoin issuers during times of ‌financial stress,⁣ considering establishing central bank liquidity arrangements. Furthermore, the central bank ​proposes that most systemically important stablecoins must hold 40% of their backing assets in unremunerated deposits at the Bank of England, with the remaining 60% held⁢ in short-term UK government debt.