The Bank of England has initiated new regulations aimed at limiting stablecoin ownership and revising issuer requirements in the UK. These proposals could have significant implications for the DeFi market.
Goals of the Bank of England's New Proposals
The Bank of England (BoE) has presented new proposals concerning stablecoins. They are aimed at restricting stablecoin ownership and updating requirements for their issuers. These changes are intended to minimize risks associated with stablecoins. The BoE, along with the UK Financial Conduct Authority (FCA) Consultation Paper, focuses on the composition and custody of assets backing stablecoins.
Crypto Industry Responses to New Limits
Crypto industry participants have actively expressed their concerns regarding the new proposals. Executives from major DeFi platforms like Aave and MakerDAO have voiced their worries through official channels. Financial impacts may result in increased operational costs for stablecoin issuers, which could also negatively affect liquidity in UK-regulated DeFi protocols.
Comparison with International Regulations
The Bank of England's proposal echoes the US GENIUS Act, which introduced similar stablecoin standards, leading to liquidity migration. European Central Bank consultations on e-money tokens have also shown similar consequences in past years. Experts anticipate that strict asset flexibility and redemption limitations may lead to reduced innovation and liquidity for UK-based protocols.
The Bank of England's stablecoin regulation proposals may fundamentally alter the cryptocurrency market in the UK, raising concerns within the crypto industry and drawing comparisons with international practices.
