The Bank of England has released its latest consultation paper outlining a regulatory framework for stablecoins, a development that marks another step in the United Kingdom’s long process of integrating digital assets into the existing financial system. The document followed two years of discussion with a broad range of industry actors and reflects updates from stakeholders across banking, payments, academia, and digital asset firms. Although the regulator removed some of the strictest elements from its earlier proposals, the updated regime still generated criticism from segments of the stablecoin sector. Several UK based issuers argue that the central bank remains overly cautious and continues to emphasize downside risks even when proposing mechanisms that could strengthen market stability. The consultation has attracted significant attention due to its potential impact on how sterling based tokens are issued, backed, and supervised at scale within formal payment systems. Industry participants note that the UK has positioned itself as open to innovation, but the slow pace of regulatory development has created uncertainty for firms that require clear rules before launching new products.
One of the primary points of contention relates to restrictions on what the central bank defines as systemic retail stablecoins. These are tokens intended for widespread use in everyday transactions such as salary payments and shopping. The proposed limits would cap holdings at twenty thousand pounds for individuals and ten million pounds for businesses that accept them as payment. The central bank has stated that these measures are designed to protect financial stability by preventing large outflows of deposits from traditional banks into digital tokens. While some stakeholders acknowledge this mandate, others argue that these caps may be impractical to enforce. Many stablecoins circulate through secondary markets and peer to peer channels, making it difficult for regulators to track individual exposures. Industry advocates also raised questions about operational oversight, noting that issuers would be responsible for monitoring customer balances even when users acquire tokens across multiple platforms. Comments submitted during the consultation highlight the need for clearer definitions of when an issuer becomes systemic and what obligations follow once that threshold is reached.
The paper includes features considered positive by stablecoin issuers, such as potential access to central bank liquidity lines and the ability to repo reserves to support liquidity management. These tools could strengthen the operational resilience of sterling denominated tokens if applied effectively. However, industry representatives maintain that the UK has not yet provided the predictable timelines and licensing pathways needed to build competitive stablecoin products. The country began implementing crypto related rules in 2017, but progress has been slow and complicated by political changes and shifting policy priorities. Advocacy groups note that the lack of a finalized licensing framework has already pushed some firms to develop products in jurisdictions with faster approval processes. Legal experts argue that stability and clarity are essential for the UK to maintain relevance as the stablecoin sector expands globally. The consultation signals a cautious but deliberate approach, with regulators encouraging innovation while emphasizing that any token functioning as money must operate under controls consistent with the broader financial system.
