The Bank of England has officially reversed its controversial proposal to limit the amount of stablecoins that individuals and consumers could hold, bowing to pressure from a UK House of Lords committee and the crypto industry.
The central bank said on Monday it would abandon plans to impose a £20,000 ($27,000) holding limit on individuals and a £10 million limit on businesses, in a statement on Monday. Instead, the BOE is moving toward a “temporary issuance guardrail” at the macro level, capping the total circulation of any systemic stablecoin at £40 billion ($50.6 billion).
The central bank also lowered to 30% the amount of collateral assets in zero-interest-bearing central deposits that it requires from issuers of stablecoins, a digital currency linked to fiat. This allows stablecoin companies to allocate up to 70% of their reserves to yield-generating short-term UK government debt securities (Treasuries) with maturities of less than six months, according to the release.
Although issuers can reap the yield from these Treasuries, the BoE strictly prohibits companies from paying interest or dividends directly to users for simply holding stablecoins. However, the bank explicitly allows activity-based rewards, such as cash back tokens or loyalty points directly tied to payment transactions through Web3 apps.
