Bank of England softens stablecoin stance with new proposals

Core Viewpoint - The Bank of England (BoE) is proposing new rules for stablecoin issuers, allowing them to invest up to 60% of their backing assets in short-term government debt, indicating a shift in its regulatory approach towards the stablecoin sector [1][3]. Group 1: Regulatory Changes - The BoE's new proposal suggests a softening stance compared to a previous 2023 proposal that required issuers to hold all assets with the bank, which would not earn interest [2]. - The BoE plans to oversee only stablecoins that are likely to be widely used for payments and has introduced a temporary regime for issuers previously regulated by the Financial Conduct Authority (FCA), allowing them to invest up to 95% of their backing assets initially [4]. - The BoE is considering offering central bank liquidity facilities to systemic stablecoin issuers during market stress, providing a safety net if they cannot sell their reserve assets in the private market [6]. Group 2: Industry Impact - The crypto industry has sharply criticized the BoE's earlier proposal, which mandated that 100% of assets be held with the bank, reflecting concerns over the impact of such regulations on the sector [2]. - The BoE has retained unpopular plans to introduce temporary caps on the value of stablecoins that individuals and businesses can hold, although larger businesses may be exempted if necessary [5]. - Stablecoins used for non-systemic purposes, such as trading crypto tokens, will fall outside the BoE's regulatory regime and will instead be overseen by the FCA [6].