A bipartisan assembly of members from the House of Commons and the House of Lords in the UK—including former Defense Secretary Sir Gavin Williamson, shadow Science and Tech (AI) Minister Viscount Camrose, and ex-Prime Minister Rishi Sunak’s chief whip, Lord Hart—have called on Chancellor Rachel Reeves to take action regarding the Bank of England’s proposed regulations for systemic stablecoins.
In a joint open letter addressed to the Chancellor on Thursday, they cautioned that the Bank of England’s regulations for stablecoins could potentially drive innovation and capital away from the UK.
Stablecoins as a “foundation” of the digital economy
The lawmakers asserted that these plans risk making the UK a “global outlier” by limiting most wholesale stablecoin usage outside the Digital Securities Sandbox, banning interest on reserves and enforcing what they describe as “impractical and anti-innovation” holding limits that might push activities toward dollar stablecoins like USDC (USDC) and USDt (USDT).
The signatories contend that stablecoins are already emerging as a “foundation of the digital economy,” and caution that the UK is “drifting toward a fragmented and restrictive approach” that could hinder adoption and diminish London’s global significance.
Related: UK central bank still ‘disproportionately cautious’ about stablecoins
They emphasized that British pound-pegged stablecoins account for less than 0.1% of global issuance, arguing that the current framework exaggerates depositor-flight risks while undermining the government’s ambition to position the UK as a “world-leading destination for digital assets.”
Asher Tan, co-founder and CEO of CoinJar, a UK Financial Conduct Authority-registered cryptocurrency exchange, shared with Cointelegraph that the letter represents a “growing frustration across the digital asset landscape” that the UK is at risk of “regulating tomorrow’s financial architecture with outdated assumptions.”
Jakob Kronbichler, co-founder and CEO of Clearpool, an onchain credit marketplace, stated that stablecoins are already serving as infrastructure for payments, capital markets, and onchain credit, rather than being merely “experimental products.”
He expressed that if regulation continues to regard them as “niche or temporary,” it may hinder adoption in the very sectors where the UK aspires to lead.
Related: FCA trials crypto transparency templates as UK shapes new rulebook
The Bank of England’s stablecoin agenda
Under the proposed regulatory framework for sterling-denominated systemic stablecoins, the Bank intends to impose temporary holding caps of £20,000 ($26,500) per coin for individuals and about $13.3 million for businesses, with exemptions for larger corporations.
Issuers would need to maintain at least 40% of their reserves as non-interest-bearing deposits at the bank and up to 60% in short-term UK government securities.
Tan remarked that proposals such as hard caps or limitations on reserve economics restrict functionality too severely. “They won’t fully eliminate risk,” he added, “it will merely shift activity to jurisdictions with more adaptable regulatory environments.”
Related: Bank of England governor says stablecoins could reduce reliance on banks
How the UK compares to other jurisdictions
In the European Union, the Markets in Crypto-Assets Regulation (MiCA) already offers a functional framework for euro and other asset-referenced tokens, capping non-EU currency stablecoins to safeguard monetary sovereignty rather than to limit overall market growth.
In contrast, the Bank of England’s per-user limits and wholesale restrictions impose greater constraints, risking tighter usage regulations than those in MiCA.
In the US, the newly passed GENIUS Act aims to facilitate large-scale payment and settlement applications without blanket per-wallet caps or a restrictive sandbox model, which the authors of the UK letter claim puts London in danger of watching the EU and US capture the “next wave of capital markets innovation.” Kronbichler commented:
“If pound-denominated stablecoins are systematically less efficient than offshore options, activity won’t disappear; it will migrate overseas.”
