London: The Bank of England (BoE) has proposed a new regulatory framework for stablecoins, aiming to tighten oversight of digital currencies deemed “systemic” due to their potential impact on the financial system. Under the draft rules, issuers of such stablecoins would be allowed to invest up to 60% of their backing assets in short-term government debt.
The move reflects growing global concern over stablecoins’ rapid adoption and the risks they may pose to liquidity and market stability. Stablecoins, which are cryptocurrencies pegged to fiat currencies, are designed to maintain stable value, but their failure could trigger wider financial disruptions if left unchecked.
The BoE’s proposals seek to ensure that stablecoins recognized as systemic fall within the regulatory perimeter. Issuers would be required to hold high-quality assets to back their digital currencies, while also adhering to stricter transparency and reserve-management rules. Smaller or non-systemic stablecoins might face lighter oversight, though the line between systemic and non-systemic could become a point of debate within the industry.
Financial experts suggest that the BoE’s approach aligns with international trends, as regulators in the United States, the European Union, and Asia intensify scrutiny of digital assets. By providing clearer rules, the BoE aims to bolster investor confidence and encourage the stablecoin market to operate with the same rigor as traditional financial products.
The draft proposals are open for consultation, allowing industry participants to provide feedback before final regulations are implemented. Authorities expect that the final rules will set a new standard for the safe issuance and management of digital currencies in the UK and potentially influence global regulatory norms.