The Bank of England's "prescriptive" rules could potentially "killing" London's chances of becoming a global hub for stablecoins, according to a warning from an industry body.
The body is calling for the swift establishment of a regulatory framework to support the use of these digital assets, as reported by .
A report by Innovate Finance suggests that London's dominance in the foreign exchange market, where it accounts for up to 40% of global trading, could set the stage for the capital to become the "Eurodollar market for stablecoins."
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However, the report indicates that the Bank of England's stance on holding limits and asset-backing requirements is hindering the 海角视频's opportunity to gain a foothold in the $200bn industry. It urges the Bank to publicly retract its proposals and abandon its "bias towards incumbents and legacy systems."
Under the Bank's latest proposals, regulated stablecoins would face holding limits as low as £20,000. Issuers would be prohibited from offering interest to customers and would be required to back the assets with central bank deposits.
In contrast, Innovate Finance advocates for the elimination of deposit limits and proposes allowing issuers to offer returns to customers via digital wallets. It also suggests permitting the coins to be backed with other high-quality liquid assets such as gilts and money market funds.
The report criticised the Bank of England's stance on stablecoins, stating that it "tended to view stablecoins as a risk to stability," and suggested that this approach is "out of kilter with other regimes and kill any opportunity for the 海角视频 to be a leading market for stablecoin trading and for corporate and wholesale services and transactions; it would in effect prevent all the growth benefits."
Innovate Finance countered by proposing that the Bank of England should be "given an innovation objective" to foster new technologies and advancements in payment systems. The organisation also recommended that officials should be "working with firms" to better understand the systemic risks posed by stablecoins.
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Highlighting the significant expansion of the stablecoin market, which has seen billions added in value each month and is now estimated to be worth nearly $240bn, Innovate Finance pointed out the difference between stablecoins and cryptocurrencies. Stablecoins are backed 1:1 with liquid assets and aim to maintain a stable value by being pegged to a reference asset, usually a fiat currency, thus reducing volatility.
Despite concerns that rapid trading of these digital assets could lead to destabilisation of the banking system during periods of financial stress if their use became widespread, Innovate Finance argued that "relying on slow and outdated technology in order to limit risks...is the stability of the graveyard."