The Bank of England is reconsidering parts of its proposed framework for sterling stablecoins after industry participants argued that draft rules were operationally unworkable. Deputy Governor Sarah Breeden stated the central bank is looking very hard at alternative approaches to ensure the UK remains a competitive hub for digital assets.
The central bank launched a consultation in November on a framework for systemic sterling stablecoins. The initial draft proposed capping individual holdings at £20,000 and business holdings at £10 million. Issuers would also be required to place at least 40% of reserves at the BoE without earning interest.
The central bank argued that limits were needed to avoid a sudden outflow of deposits from commercial banks. A large stablecoin rapidly adopted for payments could trigger significant deposit shifts if not properly constrained. However, industry groups and prospective issuers countered that the caps were operationally cumbersome. They warned that such limits could deter serious institutional use of regulated UK stablecoins.
Breeden acknowledged that the way limits were proposed was cumbersome operationally for a temporary measure. She noted that the central bank is genuinely open to thinking whether there are other ways of achieving their objective. The reassessment comes as the US advances its own stablecoin legislation. This raises concerns that overly restrictive UK rules could push stablecoin activity toward more commercially flexible jurisdictions.
How Is The US Regulating Stablecoin Reserves?
BlackRock has filed a comment letter with the U.S. Office of the Comptroller of the Currency. The asset manager supports the agency's proposed regulatory framework for payment stablecoin issuers under the GENIUS Act. The firm submitted seven recommendations aimed at permitting broader reserve eligibility. These recommendations also seek flexible compliance rules to support institutional adoption.
The OCC proposal outlines requirements for Permitted Payment Stablecoin Issuers. It addresses reserve assets, diversification, concentration, capital, and supervisory standards. BlackRock favors the agency's Option A, which combines a principles-based approach with an optional quantitative safe harbor. This safe harbor includes 10% daily and 30% weekly liquidity thresholds.
The firm also urged the OCC to remove a proposed 20% cap on tokenized eligible reserves. BlackRock argued that such limits penalize form over substance rather than actual risk. The asset manager advocated for the inclusion of U.S. Treasury Floating Rate Notes with up to two-year maturities as eligible reserves. This regulatory input signals where major asset managers want the boundaries drawn before final rules are implemented.
What Are The Compliance Standards For Stablecoins?
A US regulatory draft under the GENIUS Act is poised to define stablecoin regulation. The draft was jointly developed by the Treasury Department’s FinCEN and OFAC. Legal expert Bill Hughes suggests this draft could set the standard for future US enforcement. It may influence how the SEC and CFTC approach crypto assets.
A critical distinction in the draft is the treatment of primary versus secondary markets. FinCEN has adopted a relaxed stance on secondary market transactions. The agency argues that imposing customer verification or ongoing monitoring obligations would create an operational burden outweighing the benefits. Conversely, OFAC’s approach is significantly stricter.
The draft requires payment-oriented stablecoin issuers to have the technical capacity to block prohibited transactions. This applies to both primary and secondary markets. Furthermore, it mandates that individuals on sanctions lists be prevented from interacting with stablecoin smart contracts. This marks the first time a regulatory requirement directly addresses the technical structure of smart contracts.
Uncertainty remains regarding whether issuers must proactively monitor and filter on-chain transactions. Hughes notes that this approach distinguishes between relaxed secondary market oversight and strict sanctions enforcement via smart contract integration. The draft aims to balance operational feasibility with robust anti-money laundering policies.