UK Sets Stablecoin Limits, Framework Planned for 2025

These measures aim to stabilize markets while aligning UK policies with U.S. frameworks, drawing industry attention. Immediate impacts are anticipated on major stablecoins like USDT, USDC, and closely involved DeFi protocols.

Framework Details

The Bank of England is preparing a stablecoin regulatory framework targeting a 2025 rollout, with limits of £20,000 for individuals and £10 million for businesses. The temporary limits aim to preserve financial stability during this period.

Next steps outlined for UK stablecoin regulation by KPMG

Sasha Mills’ keynote on finance sector operations and future collaborations highlighted the adaptability to industry feedback by proposing changes concerning holding backing assets.

Sasha Mills’ keynote on finance sector operations and future collaborations

Impact on Trading and Market Structures

Initial reactions indicate potential changes in stablecoin trading strategies and market reliance on tokens like USDT and USDC. This may affect how these assets are used in payment systems and trading platforms.

Terms of reference established for dematerialisation market action taskforce

The implications for financial policy are significant, as temporary limits aim to bridge the gap to full regulatory maturity. Industry players need to adjust to new holding constraints and explore alternative asset allocations.

Global Context and Liquidation Effects

Past events in the EU and Japan have shown how similar regulations impacted stablecoin market structures and auditing requirements. The UK’s decision may lead to equivalent obligations for stablecoin issuers.

Experts foresee potential reallocation of liquidity in DeFi markets, amplifying the influence on systems that depend heavily on stablecoins. There could also be impacts on Layer 1 and 2 protocols like ETH, affecting network transaction volumes.