Market News

Szu Ping Chan

The Bank of England has dropped demands for strict rules governing cryptocurrencies following pressure from Donald Trump’s administration to soften its stance.

Threadneedle Street unveiled proposals on Monday aimed at helping the UK to grab a slice of the $300bn (£230bn) market.

While officials confirmed plans to cap the amount of so-called stablecoins that people can own at £20,000 for individuals and £10m for businesses, it said retailers and cryptocurrency exchanges would be exempt from the “temporary” limits.

It comes just weeks after Rachel Reeves hosted Scott Bessent, the US treasury secretary during President Trump’s state visit in September.

The Chancellor is understood to have been pressed on the adoption of digital assets by the Trump administration, which has embraced the use of cryptocurrencies, despite the US president’s previous scepticism.

Mr Trump has described stablecoins as “perhaps the greatest revolution in financial technology since the birth of the Internet itself”.

Unlike cryptocurrencies like Bitcoin, stablecoins are pegged to established currencies such as the pound and dollar and are designed to be less volatile.

Supporters say stablecoins will make payments easier by giving users a faster and cheaper way to send money around the world.

Officials remain concerned that these cryptocurrencies could weaken the banking system if users divert money from their bank accounts into crypto wallets.

However, in a further softening of their stance, officials said issuers would be allowed to back 60pc of their coins with short-term government debt.

This marks a significant shift away from initial proposals in 2023 that stated all assets needed to be held as zero-interest deposits at the central bank.

However, America’s Genius act regulating stablecoins remains less stringent, which will reinforce fears that Britain is lagging behind the US on digital currencies.

Andrew Bailey, Governor of the Bank of England, on Monday described stablecoins as offering “great opportunities” for innovation in finance.

He said: “We are designing a regulatory regime for stablecoins that is fit for the future. Use of regulated stablecoins could lead to faster, cheaper retail and wholesale payments, with greater functionality, both at home and across borders.”

It marks a change in tone from Mr Bailey after two years ago he dismissed them as “not robust”. He previously warned that stablecoins “in their current form and, as currently organised, do not meet the standards we expect of safe money in the financial system”.

The Bank has come under political fire for its stance against stablecoins.

In September, Reform leader Nigel Farage launched a blistering attack against “dinosaur bureaucrats” at the Bank, accusing officials of being “openly hostile to innovators” and squandering a chance to become a world leader in digital assets.

Commenting on the consultation, Richard Tice, the deputy leader of Reform, said he was “delighted that the Bank of England has listened to Reform UK’s reason of logic and growth. We will continue to push them to do what’s right for growth and the country”.