Bank of England Proposes Tough Stablecoin Rules After USDC Depegging Incident

The Bank of England has introduced strict regulatory proposals for systemic stablecoins, drawing lessons from the 2023 Silicon Valley Bank collapse and Circle's USDC temporary depegging. Deputy Governor Sarah Breeden highlighted the necessity for strong safeguards, including a 40% reserve requirement held at the central bank and a £20,000 individual holding limit.

The reserve requirement directly addresses the March 2023 crisis when $3.3 billion of Circle's reserves were stuck at SVB, causing USDC to briefly lose its dollar peg. "Those numbers align with what occurred during the SVB and Circle incident," Breeden explained, justifying the 40% threshold as essential financial protection.

Additional measures include a £10 million cap for corporate holdings, aimed at reducing potential stress on traditional banking systems. With 85% of UK mortgages reliant on bank deposits, regulators are concerned that large-scale shifts to stablecoins could restrict credit availability.