Stablecoins Get Backing From Cross-Party UK Lawmakers Urging Pro-Innovation Rules

Core Viewpoint - A coalition of U.K. lawmakers is urging Chancellor Rachel Reeves to ensure that the regulatory framework for stablecoins fosters innovation and does not drive capital overseas, as current proposals from the Bank of England may undermine London's status as a global financial hub [1][5]. Group 1: Importance of Stablecoins - Stablecoins are becoming a crucial part of the digital economy, enhancing financial transactions by reducing costs, speeding up settlements, and promoting financial inclusion [2]. - Transactions involving stablecoins reached $27.6 trillion in 2024, exceeding the combined activity of Visa and Mastercard by nearly 8%, with projections suggesting this could surpass $100 trillion by 2030 [3]. Group 2: Concerns Over Regulatory Framework - The Bank of England's draft framework imposes restrictions on stablecoin usage in wholesale markets, bans interest on reserves, and limits holdings to GBP 20,000, which could hinder the U.K.'s participation in financial innovation [4]. - Such limitations may render pound-backed stablecoins less attractive, pushing investors towards dollar-pegged alternatives like USDC and USDT, which are outside U.K. regulatory oversight [4]. Group 3: Potential Market Implications - The lawmakers warn that these regulatory constraints could lead to a migration from pound-backed digital assets to dollar-based ones, resulting in a two-tier market where most on-chain activities are denominated and settled in U.S. dollars [5]. - The urgency of this intervention is heightened by the U.S. advancing its GENIUS Act to clarify regulations for digital assets, raising concerns about the erosion of London's fintech leadership due to indecision in domestic policy [5]. Group 4: Call for Action - The letter concludes with a call for a progressive stablecoin framework that would attract international investment, support high-value fintech growth, and reinforce the U.K.'s position as a global innovation hub [6].