BoE’s Stablecoin Exemptions Signal UK’s Push to Rival US Crypto Dominance
move addresses industry criticism of proposed limits—£10,000 to £20,000 for individuals and £10 million for businesses
The Bank of England’s decision to introduce exemptions on stablecoin holding caps marks a pivotal regulatory pivot, potentially unlocking billions in liquidity flows toward Bitcoin and Ethereum by easing operational barriers for UK-based exchanges. Announced on October 7, 2025, this move addresses industry criticism of proposed limits—£10,000 to £20,000 for individuals and £10 million for businesses—that risked driving crypto activity offshore. By allowing waivers for firms like exchanges needing large stablecoin reserves for trading and arbitrage, the BoE fosters a more competitive environment amid the US’s Genius Act, which bolsters dollar-backed stablecoins.
This could position the UK as a European gateway for stablecoin innovation, with early market reactions showing heightened optimism in DeFi and exchange sectors.
Exemptions Alleviate Exchange Constraints and Enhance Liquidity
The exemptions target crypto exchanges and market makers, who handle hundreds of millions in daily volume and require substantial stablecoin inventories for efficient operations. Without these carveouts, platforms faced asset fragmentation or relocation to jurisdictions like Switzerland or Singapore, eroding UK liquidity.
Recent data from DefiLlama indicates global stablecoins at $303 billion in circulation, with minimal GBP-pegged variants ($581,000), underscoring untapped potential. Industry leaders, such as Greengage CEO Sean Kiernan, warn that rigid caps could divert liquidity to New York, but the BoE’s flexibility counters this, potentially tightening bid-ask spreads and deepening order books for BTC/ETH pairs. On-chain metrics reflect bullish sentiment: BTC dominance at 54.87% and ETH gas fees low at 0.11 Gwei, signaling readiness for increased inflows.
Broader Regulatory Alignment Boosts Stablecoin Utility
In a wider context, the BoE’s allowances integrate stablecoins into the Digital Securities Sandbox for settlement, enabling real-world testing of blockchain securities. This aligns with FCA’s October 8, 2025, lift on retail crypto ETN bans, expanding access via tax-advantaged accounts.
Unlike the EU’s MiCA framework imposing strict issuer rules, the UK’s approach incentivizes dollar-stablecoin concentration, potentially surging cross-chain flows to ETH ecosystems. Verified X influencer VirtualBacon notes institutions prioritizing BTC/ETH and stablecoins for liquidity buckets, while Leo Lanza highlights ETH’s role in stablecoin surges post-Genius Act.
Fundamentals strengthen: ETH stablecoins exceed $183 billion, with innovations like Abu Dhabi’s bank launch underscoring global traction.
The exemptions could catalyze short-term liquidity boosts for BTC/ETH, with medium-term implications for UK as a stablecoin hub amid macroeconomic shifts. Investors might consider positioning in BTC/ETH for potential inflow surges, monitoring year-end consultations for risks like delayed implementation. Watch institutional adoption metrics for sustained momentum.
This article is for informational purposes only and is not intended as investment advice. Conduct your own independent research before making any financial decisions.
Sources and Citations:
1. Bloomberg: https://www.bloomberg.com/news/articles/2025-10-07/boe-plans-carveouts-on-stablecoin-cap-after-industry-backlash
2. CryptoRank: https://cryptorank.io/news/feed/6f678-will-boes-exemptions-supercharge-stablecoin-rails-into-btc-and-eth
3. CryptoSlate: https://cryptoslate.com/will-boes-exemptions-supercharge-stablecoin-rails-into-btc-and-eth/
4. Yahoo Finance: https://finance.yahoo.com/news/bank-england-softens-stablecoin-cap-121231043.html
5. VirtualBacon on X: https://x.com/VirtualBacon0x/status/1973467419034394770
6. Leo Lanza on X: https://x.com/l3olanza/status/1973464431532138840
