Crypto Assets industry observers believe that the new stablecoin regulations proposed by the Central Bank of the UK are too strict.

The UK Central Bank, the Bank of England (BOE), has incorporated feedback from the Crypto Assets industry in the drafting process of its stablecoin regulatory proposal, but some observers still believe that the draft imposes overly strict limitations on the industry. This document was published on November 10, nearly two years after the Bank of England first released a discussion paper on this topic. The earlier document outlined the development blueprint for the UK Crypto Assets ecosystem. However, many industry participants are concerned that the regulations will stifle the growth of the local digital asset industry. The Bank of England stated that it received feedback from 46 different stakeholders, including banks, non-bank payment service providers, payment system operators, industry associations, academia, and individuals from diverse groups. The UK Central Bank may have canceled some of the more stringent requirements, but some industry insiders believe it is still not enough. The Chief Legal Officer of UK stablecoin issuer Agant, Tom Rhodes, stated that the UK Central Bank remains too cautious and restrictive.

The Bank of England remains cautious about stablecoins.

Rodgers stated that the new version has undergone multiple modifications based on the 2023 edition, and the latest proposal indeed includes some innovative features, such as the ability for the Bank of England to have direct liquidity quotas and to repurchase reserves for liquidity purposes. He mentioned that, regarding the UK market, these proposals could be further explored to establish a more competitive supportive asset system while not compromising the properties of stablecoins. However, Rodgers pointed out that despite the Bank of England's improved attitude towards stablecoins, the Central Bank has expressed exceptionally strong concerns about the risks of stablecoins. One of the most controversial limitations in the document is the restrictions on the so-called “systemic retail stablecoins” of the Bank of England. The document defines stablecoins as “stablecoins widely used by individuals for everyday payments, such as shopping and receiving wages.”

The Bank of England has set the limit for individual holdings of stablecoins at £20,000.

The Bank of England wants to set a limit of £20,000 for personal holdings of stablecoins and £10 million for corporate holdings. This is an increase from the initial proposal, but the idea of limiting the amount individuals can hold in Crypto Assets has not been accepted by everyone. Crypto Assets influencer Aleksandra Huk stated that the Bank of England wants to cap stablecoin holdings at £20,000, but who gives them the authority to tell everyone what to buy, where to keep their money, and how much to hold?

The development of Crypto Assets in the UK is taking a gradual approach.

This proposed regulation also has some limitations. Geoff Richards, the community leader of Ontology Network, pointed out that the proposal only applies to GBP-denominated stablecoins used in the UK payment system, which could potentially become systemic currencies. It does not include USDT, USDC, or any other DeFi tokens.

Ian Taylor, a board member of the crypto industry advocacy organization Crypto UK, told Cointelegraph that he understands the more cautious approach of the central bank, at least in terms of stablecoin limits, as the responsibility of the Bank of England is to maintain financial stability. Financial stability is closely related to the banking system. Banks absorb deposits and use these deposits as collateral to issue loans, thereby creating credit, which is an economic benefit for any economy. The Bank of England is concerned that withdrawing deposits from banks would reduce lending capacity and thus impact financial stability, a concern that is not unfounded. Therefore, this is why they wish to proceed gradually.

Rodgers stated that the vast majority of stablecoins in the UK will not be regulated in any case, at least not as described in the document. He pointed out that Mastercard was only recognized as a systemically important payment system in 2021, and non-systemically important stablecoins will be regulated under the rules of the Financial Conduct Authority (FCA), which have fewer restrictions.

The UK open stablecoin still requires a more完善的 supervisory framework.

The issuance of stablecoins enabling access to Central Bank liquidity and the ability to open deposit accounts at the Bank of England is undoubtedly a welcome development. However, representatives from the Crypto Assets industry believe that there is still room for improvement in the Central Bank's plans. Regarding the cap on stablecoins, Roz has stated that the threshold for systemic importance remains uncertain. It would be helpful if the UK Treasury could clarify when the scale of issuers reaches a level that poses risks to the overall UK economy before designating them as systemically important.

Taylor also pointed out that there are difficulties in enforcing these stablecoin limits. If the government permits the issuing entities, then the government must be responsible for monitoring the amount of stablecoins received by each customer, whether they are wholesalers, corporate clients, or retail customers. The problem is that many people acquire stablecoins through the secondary market or various different channels. People may receive stablecoins as compensation at work, or in exchanges or peer-to-peer transactions. Therefore, the actual enforcement situation remains questionable, and there are also no relevant details.

The development of stablecoins in the UK is slow and cautious.

Arvin Abraham, a partner at Goodwin Procter, stated that overall, clarity and speed will make the UK stablecoin ecosystem more competitive. He told Cointelegraph that regulators need to provide clear processes and predictable timelines for issuers to smoothly complete the approval process. However, speed is not the government's strong suit; since 2017, the UK government has been developing cryptocurrency regulatory policies, when it first implemented anti-money laundering and know your customer (KYC) requirements for cryptocurrency-related businesses such as exchanges. Now, eight years later, the Central Bank is still formulating policies based on industry feedback. Slow progress is an issue.

Taylor explained that there are many reasons for the slow development in the UK, including frequent changes in government and a lack of real supporters among all key stakeholders, whether from the current government, the Treasury, or the Financial Conduct Authority (FCA). Taylor stated that UK authorities have been consulting on a broader regulatory framework for stablecoins for nearly five years but have still not established any practical licensing framework, which is problematic in many ways and does not help businesses looking to issue stablecoins in the UK. They do not have a clear roadmap, which in turn forces them to move to other jurisdictions where regulatory frameworks already exist.

The UK's progress on cryptocurrency regulation may be slow, slower than many in the industry hope, but Abraham believes the Central Bank of the UK is pragmatic and fair. Its core message is to welcome innovation, but if cryptocurrencies are to operate like fiat currencies, there needs to be fiat-level regulation.

This article states that cryptocurrency industry observers believe the new stablecoin regulations proposed by the Bank of England are too strict, and it first appeared in Chain News ABMedia.