Lawmakers Say Bank of England Stablecoin Proposals Will ‘Limit Adoption, Push Activity Overseas’
A cross-party group of UK lawmakers has urged Chancellor Rachel Reeves to intervene in the Bank of England’s draft approach to regulating so-called “systemic stablecoins,” warning that the current proposals could deter innovation and push digital-asset activity out of the country.
In a letter, the parliamentarians argue that the Bank’s framework risks making sterling-backed stablecoins uncompetitive for everyday and business use, while encouraging greater reliance on offshore, dollar-pegged alternatives such as USDT and USDC, which already dominate global on-chain activity.
The lawmakers and industry voices backing the concerns say the UK is “drifting” toward a fragmented and restrictive model. They warn that, rather than improving safety, the proposed rules could mainly redirect users and capital away from pound-denominated digital money infrastructure.
Key objections raised by MPs include:
- A proposed holding cap of £20,000 for citizens and businesses.
- Restrictions on the use of stablecoins in wholesale markets, with most wholesale activity effectively limited to the Digital Securities Sandbox.
- A prohibition on paying interest on reserves held to back stablecoins.
- Stringent reserve requirements for issuers, which MPs describe as impractical in their current form.
The letter argues that imposing caps and limits of this kind could turn the UK into a “global outlier,” noting that lawmakers do not see other major jurisdictions adopting similar constraints. In their view, that mismatch could weaken London’s position as a global financial center at a time when the government has said it wants the UK to be a leader in digital assets.
More broadly, the lawmakers frame stablecoins as an increasingly important “pillar of the digital economy,” with potential applications that extend beyond retail payments. They point to the relevance of stablecoins for future use cases such as wholesale settlement and cross-border payments, areas that the Bank of England has also considered when assessing when a stablecoin could become “systemic” as adoption grows.
The pushback comes amid a wider debate over how to balance innovation with financial stability in stablecoin regulation. MPs argue that overly restrictive design choices could undermine domestic adoption of pound-backed stablecoins and, unintentionally, reinforce the dominance of dollar-based stablecoins used from abroad.