Bank of England's Breeden says diluting stablecoin rules further could damage financial system

By Phoebe Seers and Tommy Reggiori Wilkes

LONDON (Reuters) -Bank of England Deputy Governor Sarah Breeden connected Tuesday warned that further diluting rules for stablecoins risked endangering fiscal stableness and causing ​a recognition crunch, and said that the UK needed a antithetic attack to the United States.

The Bank of ‌England connected Monday acceptable retired a raft of caller rules for systemic stablecoins - integer tokens designed to support a changeless worth - ‌used for payments. It marked a softening of its earlier approach, but the crypto manufacture said did not spell acold capable and could inhibit the maturation of stablecoins successful Britain.

Those rules see limiting stablecoin holdings to 20,000 pounds ($26,840) per idiosyncratic - which nary different large jurisdiction does - and requiring stablecoin issuers to clasp 40% of ⁠the assets backing the coins with the BoE,‌ wherever they would beryllium unrenumerated.

NEW RULES GROUNDED IN PAST STRESS EVENTS

In an interrogation with Reuters, Breeden said the 40% fig was "grounded" successful past accent events erstwhile ‍depositors and coinholders ran for the exit, specified arsenic the 2023 illness of Silicon Valley Bank and erstwhile the USDC stablecoin, issued by Circle, mislaid its dollar peg.

"Look astatine what happened with SVB, with Circle – those numbers are broadly ​in enactment with that. That’s wherefore we’re proposing 40% alternatively than a smaller number," ‌she said.

Breeden besides defended the 20,000 lb bounds for individuals 10 cardinal pounds for astir companies, saying they would beryllium impermanent and "halve the stress" connected banks and recognition instauration caused by customers withdrawing slope deposits to bargain stablecoins.

Whereas the U.S. has a overmuch larger, much liquid marketplace for non-bank finance, astir 85% of mortgages and different user borrowing comes from slope concern successful Britain, Breeden noted.

DIFFERENT SET OF RISKS IN UK ⁠VS US

"We person a antithetic acceptable of risks to negociate ​as we modulation to bringing successful this caller signifier of money," ​Breeden said.

The United States' clasp of cryptocurrencies nether President Donald Trump is forcing different countries to measure if they stay competitive.

Breeden declined to elaborate connected erstwhile caps would beryllium lifted, but said that ‍if stablecoins summation traction, the ⁠BoE would expect banks to accommodate and make wholesale backing sources to regenerate mislaid deposits.

The BoE’s latest proposals people a displacement from a 2023 program that would person required issuers to clasp 100% of backing assets ⁠as unremunerated deposits astatine the cardinal bank, which the manufacture said would person made the stablecoin assemblage unviable.

The manufacture connected Monday indicated it would ‌push the BoE to further soften the latest proposals.