A cross-party group of members of the House of Commons and the House of Lords in the United Kingdom, including former Defense Secretary Sir Gavin Williamson, shadow Science and Tech (AI) Minister Viscount Camrose, and the former Prime Minister, Rishi Sunak’s Chief Whip Lord Hart, have urged Chancellor Rachel Reeves to intervene over the Bank of England’s proposed regime for systemic stablecoins.
In a joint open letter to the Chancellor on Dec. 11, they warned that the Bank of England’s proposals for regulating stablecoins could drive innovation and capital offshore.
Stablecoins already a “pillar” of the digital economy
The parliamentarians say the plans risk turning the UK into a “global outlier” by barring most wholesale use of stablecoins outside the Digital Securities Sandbox, prohibiting interest on reserves, and imposing what they call “impractical and anti-innovation” holding caps that could push activity into dollar stablecoins such as USDC (USDC) and USDt (USDT).
The signatories argue that stablecoins are already becoming a “pillar of the digital economy,” and warn that the UK is “drifting towards a fragmented and restrictive approach” that will deter adoption and weaken London’s global role.
Related: UK central bank still ‘disproportionately cautious’ about stablecoins
They stress that British pound-pegged stablecoins represent less than 0.1% of global issuance, claiming the current framework overstates depositor-flight risk while undercutting the government’s goal of making the UK a “world‐leading destination for digital assets.”
Asher Tan, co-founder and CEO of UK Financial Conduct Association-registered CoinJar, one of the longest-running cryptocurrency exchanges globally, told Cointelegraph that the letter reflected a “growing frustration across the digital asset industry” that the UK risks “regulating tomorrow’s financial infrastructure with yesterday’s assumptions.”
Jakob Kronbichler, co-founder and CEO of Clearpool onchain credit marketplace, said that stablecoins are already functioning as settlement infrastructure for payments, capital markets, and onchain credit, not “as experimental products.”
He said that if regulation continues to treat them as “niche or provisional,” it risks slowing adoption in the very areas where the UK wants to lead.
Related: FCA trials crypto transparency templates as UK shapes new rulebook
The Bank of England’s stablecoin plans
Under the proposed regulatory regime for sterling-denominated systemic stablecoins, the Bank proposes temporary holding limits of 20,000 pounds ($26,500) per coin for individuals and around $13.3 million for businesses, with exemptions for the largest corporations.
Issuers would have to keep at least 40% of reserves as unremunerated deposits at the Bank and up to 60% in short-term UK government debt.
Tan said that proposals like hard caps or constraints on reserve economics limit functionality too aggressively. “They won’t completely eliminate risk,” he added, “it will simply relocate activity to jurisdictions with more flexible regulatory frameworks.”
Related: Bank of England governor says stablecoins could reduce reliance on banks
How the UK shapes up to other jurisdictions
In the European Union, the Markets in Crypto-Assets Regulation, or MiCA, already provides a live framework for euro and other asset-referenced tokens across the EU, capping non‐EU currency stablecoins to protect monetary sovereignty rather than to limit overall market growth.
By contrast, the Bank of England’s per-user caps and wholesale limits go further in constraining scale, meaning the UK could end up with tighter usage constraints than MiCA.
In the US, the newly enacted GENIUS Act is designed to support large‐scale payment and settlement use without blanket per‐wallet caps or a narrow sandbox model, which the UK letter’s authors argue leaves London at risk of watching the EU and US capture the “next wave of capital markets innovation.” Kronbichler commented:
“If pound-denominated stablecoins are structurally less efficient than offshore alternatives, activity won’t disappear, it will migrate overseas.”
