The Bank of England officially reversed its controversial proposal to limit the number of stablecoins that individuals and consumers could hold, bowing to pressure from a UK House of Lords committee and the crypto industry.
The central bank said in a statement on Monday that it will abandon its plans to impose a £20,000 ($27,000) holding limit on individuals and a £10 million limit on corporations. Instead, the BOE is pivoting toward a “temporary issuance guardrail” at the macro level, limiting the total circulation of any systemic stablecoin to £40 billion ($50.6 billion).
The central bank also reduced to 30% the amount of backing assets in non-interest-bearing central deposits that issuers of stablecoins, fiat-pegged digital currencies, are required to hold. This allows stablecoin companies to allow companies to allocate up to 70% of their reserves to short-term, yield-generating UK government debt (Treasury bills) with maturities of less than six months, according to the statement.
While issuers can earn returns on these Treasury bills, the Bank of England strictly prohibits companies from paying interest or dividends directly to users simply for holding the stablecoin. However, the bank explicitly allows activity-based rewards such as cashback tokens or loyalty points linked directly to payment transactions through Web3 applications.
