British lawmakers are urging the government to reconsider the Bank of England’s proposed stablecoin rules, warning they could harm innovation and drive financial activity abroad.
Quick Summary – TLDR:
- UK lawmakers say the Bank of England’s stablecoin cap plan is too strict and could hurt the country’s fintech ambitions.
- Proposed limits include a £20,000 cap for individuals and non-interest-bearing reserves for issuers.
- Critics argue these rules could push digital finance innovation and investment out of the UK.
- Lawmakers are urging the Treasury to adopt a more flexible, pro-innovation approach.
What Happened?
A cross-party group of UK lawmakers has written to Chancellor Rachel Reeves, urging the government to intervene in the Bank of England’s proposed regulatory framework for stablecoins. They argue that the current rules could damage the UK’s standing as a global financial hub and push innovation offshore.
UK MPs warn the Bank of England’s stablecoin plans risk driving innovation OFFSHORE! 🚨
— Conor Kenny (@conorfkenny) December 12, 2025
Restrictive policies like banning interest on reserves and imposing holding limits (e.g., £20k cap) could make pound stablecoins “unattractive,” leading investors to use dollar-pegged assets… pic.twitter.com/kINj6WjCVV
Lawmakers Challenge Bank of England’s Approach
The Bank of England’s draft proposal targets so-called systemic stablecoins or digital tokens pegged to the British pound that could be used for everyday payments. The plan includes several controversial restrictions:
- A £20,000 holding limit for individuals.
- Around £10 million cap for most businesses.
- Stablecoin issuers must hold at least 40% of reserves in non-interest-bearing accounts at the Bank of England.
- Only 60% of assets can be held in short-term UK government debt.
- Restrictions on wholesale market usage outside of a controlled sandbox.
Lawmakers argue these rules could make it financially unviable for companies to issue pound-backed stablecoins, while global competitors remain free to operate under more business-friendly regimes.
Industry and Political Figures Sound the Alarm
The pushback is coming from a broad coalition, including former ministers, shadow AI officials, and peers from the House of Lords, such as Peter Cruddas, Emma Pidding, and Jonathan Berry. High-profile signatories also include former Defense Secretary Gavin Williamson.
“The UK is drifting towards a fragmented and restrictive approach that will deter innovation, limit adoption, and push activity overseas,” the group warned in their letter to the Chancellor.
Kulveer Singh Ranger, a signatory to the letter, said the stablecoin caps “risk putting the UK at a disadvantage when no other major jurisdiction is taking this approach.”
Industry Groups and Executives Echo Concerns
Crypto industry leaders are also voicing opposition. CryptoUK, a leading trade group, welcomed regulatory efforts but warned that holding caps and reserve rules would undermine the UK’s efforts to lead in digital finance.
A senior exchange executive put it bluntly: “If pound-backed stablecoins are artificially constrained, activity won’t vanish but it will simply move offshore.”
With sterling-based stablecoins making up less than 0.1% of the global market, critics say the UK should be doing more to support domestic development instead of enforcing what they see as hypothetical safeguards.
Global Context Highlights UK’s Risk of Falling Behind
The lawmakers compared the UK’s direction to international peers:
- The EU’s MiCA framework allows euro-backed stablecoins to operate at scale with reasonable safeguards.
- In the United States, the GENIUS Act is advancing efforts to support widespread adoption of regulated stablecoins for payments and settlements.
Lawmakers argue that if the UK continues with its restrictive stance, capital and talent will flow to more welcoming jurisdictions like the EU or US.
SQ Magazine’s Takeaway
Honestly, I see where these lawmakers are coming from. If the UK wants to be a global leader in fintech, it needs rules that support innovation, not stifle it before it even begins. With the rest of the world opening up to stablecoins, putting tight caps and interest restrictions in place seems like putting brakes on a race car. The digital economy is moving fast, and if we don’t move with it, we’ll end up watching from the sidelines.
