Martin Arnold

There's a real feeling that the U.S.

has stolen a march in this industry, and there's a real danger that we could be left behind.

Hi, Sonia.

Yeah, so there's two key areas that the Bank of England is planning to revise its proposals on.

The first one is on holding limits.

So the central bank has proposed that individuals will be restricted to owning no more than £20,000 per coin, and businesses will be limited to owning up to £10 million.

The second proposal that the Bank of England is looking at is its requirement for at least 40% of the assets backing a UK stablecoin to be put on deposit at the central bank, earning no interest.

Now, this is very different to the US.

So the stablecoin operators say this is making the UK very unattractive.

for them.

And I think what's going to happen here is that the Bank of England is going to reduce that 40% requirement somewhat.

This is being driven by concern that the UK is too restrictive here on stablecoins and is going to miss out on the opportunity that digital assets and stablecoins as part of that could bring to the city of London, but also to the UK economy.

And the Bank of England's really been on a journey here.

They started off with a very restrictive, sceptical approach to stablecoins, and they've been progressively diluting it because there's a real feeling that the US has stolen a march in this industry with the Genius Act that went through Congress last year, and 98% of stablecoins in the world being US dollar-based, and there's a real danger that we could be left behind here in Britain.

Yeah, so there are risks.

I mean, one is that there could be a sizable outflow of deposits from the banking system into stablecoins, and that could weaken the banking system, but also reduce the flow of credit.

to the economy.

There's also a concern that if stablecoins have too much of their assets invested in securities, that could increase the volatility of those securities if stablecoins become unstable, but it could also make stablecoins more unstable.

So by requiring them to have a

assets on deposit at the central bank, which is seen as one of the safest places to put the money, that is designed to give them an element of security, but also to make them repay anybody who wants to take their money out very easily.