The Bank of England officially reversed its controversial proposal to limit how much stablecoin individuals and consumers could hold, bowing to pressure from a UK House of Lords committee and the crypto industry.
The central bank said it will abandon its plans to impose a £20,000 ($27,000) holdings limit on individuals and a £10 million limit on businesses, in a statement on Monday, instead BOE is turning to a “temporary issuance hedge” that limits the total turnover of any single systemically stable coin to $5.40 billion.
The central bank also lowered the amount of collateral in central deposits to the 30% that paid no interest they require issuers of stablecoins, digital currency pegged to fiat, to have. This enables stablecoin firms that allow companies to allocate up to 70% of their reserves to yield-generating, short-term UK government debt (Treasury bills) with maturities under six months, according to the statement.
While issuers can reap returns from these T-bills, the BoE strictly prohibits companies from paying interest or dividends directly to users simply for holding the stablecoin. However, the bank explicitly allows activity-based rewards, such as cashback tokens or loyalty points, linked directly to payment transactions via Web3 apps.
