UK Stablecoin Cap Sparks Industry Revolt
The Bank of England's proposed plan to cap stablecoin holdings has sparked industry resistance, with Coinbase CEO Brian Armstrong criticizing UK regulators for "picking winners" in the digital currency space. Armstrong argued the caps could limit innovation and competitiveness in the stablecoin market. Meanwhile, the UK is piloting a "stablecoin sandbox" with Revolut among four companies selected for early testing.
- The proposed Bank of England caps would limit individual stablecoin holdings to £20,000 and business holdings to £10 million. The stated goal is to manage financial stability risks as the system adapts to new forms of digital money. - Beyond the caps, the Bank of England's proposal requires stablecoin issuers to back their coins with a mix of assets. At least 40% must be held in non-interest-bearing accounts at the central bank, while up to 60% can be in short-term UK government debt. - These regulations are part of the UK's broader Financial Services and Markets Act of 2023, which expanded the regulatory authority of the Bank of England and the Financial Conduct Authority (FCA) to cover digital settlement assets. - The three other companies selected to join Revolut in the FCA's regulatory sandbox are Monee Financial Technologies, ReStabilise, and VVTX. These firms were chosen from a pool of 20 applicants to test a variety of stablecoin use cases, including payments and wholesale settlement. - Testing within the FCA's sandbox is scheduled to begin in the first quarter of 2026, and the insights gathered will directly inform the final UK stablecoin regulations expected later in the year. - Critics argue that the UK's proposed holding limits are stricter than regulations in other major financial hubs. For instance, neither the European Union's Markets in Crypto-Assets Regulation (MiCA) nor proposed legislation in the United States include similar caps on individual or business holdings. - The UK government is pursuing a phased approach to crypto-asset regulation, prioritizing stablecoins because of their potential for widespread use in payments. This is intended to help the UK keep pace with other jurisdictions like the EU. - In response to industry criticism, Brian Armstrong has encouraged UK residents to support a petition from the advocacy group "Stand With Crypto UK". If the petition reaches 100,000 signatures, it could be considered for debate in Parliament.
