Bank of England’s new stablecoin rules could reshape UK crypto landscape significantly.
The Bank of England (BoE) is proposing new regulations that would significantly restrict stablecoin ownership and redefine requirements for UK stablecoin issuers. These changes aim to address risks associated with stablecoins. BoE, alongside the UK Financial Conduct Authority (FCA) Consultation Paper, is targeting the composition and custody of stablecoin backing assets. The proposals introducing limits on asset fungibility and compliance burdens are supported by consultation papers closing in 2025.
BoE Targets Stablecoin Issuer Requirements and Ownership Limits
The Bank of England (BoE) is proposing new regulations that would significantly restrict stablecoin ownership and redefine requirements for UK stablecoin issuers. These changes aim to address risks associated with stablecoins. BoE, alongside the UK Financial Conduct Authority (FCA) Consultation Paper, is targeting the composition and custody of stablecoin backing assets. The proposals introducing limits on asset fungibility and compliance burdens are supported by consultation papers closing in 2025.
Crypto Industry Concerned Over Rising Stablecoin Issuer Costs
Crypto industry participants have responded vocally to these new regulations. Executives from major DeFi platforms like Aave and MakerDAO have used official channels to voice their concerns over the proposed rules. The financial impact could involve increased operational costs for stablecoin issuers. Liquidity in UK-regulated DeFi protocols might decrease, affecting the total value locked and trading volumes as regulations create more stringent requirements.
Andrew Bailey, Governor, Bank of England – “The proposed rules will… require an issuer to suspend all redemptions in exceptional circumstances where this is necessary to protect the rights of the holders and the integrity of the stablecoin.”
US and EU Past Regulations Hint at Liquidity Shift
This proposal echoes the US GENIUS Act, which imposed similar stablecoin standards, leading to liquidity migration. European Central Bank consultations on e-money tokens have shown parallel impacts in prior years. Based on past outcomes and historical data, experts anticipate a reduction in innovation and liquidity for UK-based protocols, given the strict asset flexibility and redemption limitations being proposed by the BoE.
