The Bank of England (BoE) will exempt crypto exchanges and other operationally critical firms from proposed stablecoin holding limits, potentially supercharing money into Bitcoin (BTC) and Ethereum (ETH).
As Bloomberg News reported on Oct. 7, the central bank plans to grant waivers to firms that require large token inventories for market-making and settlement operations, according to a person familiar with the matter.
The BoE will also permit the use of stablecoins for settlement within its Digital Securities Sandbox.
The shift addresses backlash over draft rules reported in September that would have capped individual stablecoin holdings at £10,000 to £20,000 and limited firms to £10 million.
Exchanges and market makers argued that these thresholds were unworkable because operational requirements routinely require billions of dollars in stablecoin balances. The requirements included maintaining inventory for client trades, facilitating fiat conversion, and executing inter-exchange arbitrage.
Without exemptions, UK venues would have needed to fragment client assets across multiple entities or relocate custody and trading operations abroad, draining liquidity from domestic order books.
The exemptions represent an approach to keep stablecoin flows visible and regulated within the UK jurisdiction rather than pushing them offshore.
Exemptions allow billions to remain on-shore
The waivers enable UK-based exchanges and market makers to maintain centralized inventories for operational purposes, provided they do not exceed the proposed caps.
Exchanges maintain stablecoin float to facilitate instant execution and settlement. When clients deposit fiat and buy crypto, or sell crypto and withdraw fiat, platforms use stablecoin inventory to bridge those transactions. Meanwhile, market makers hold balances to provide two-sided quotes on trading pairs.
The proposed £10 million firm cap would have been insufficient at scale. Mid-sized exchanges process hundreds of millions of d
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Author: Gino Matos
