Aave founder warns U.K. rules could make GBP stablecoins ‘unattractive’
Key Takeaways
Why is the U.Okay.’s new proposal dangerous for stablecoins?
Per Kulechov, the reserve mannequin and holding restriction would repel issuers
What’s the standing of pound-backed stablecoins?
They rank tenth on the stablecoin market, and the proposal would do much less to enhance their standings.
The Founding father of DeFi lending protocol Aave [AAVE], Stani Kulechov, has slammed the current U.Okay. proposal to cap stablecoins at £20k and restrict yield-bearing reserves to solely 60%.
In an X post, Kulechov warned that if the nation proceeds with the “misguided” plan, stablecoin issuers would possible give it a cross. He quipped,
“That (60% yielding property) makes pound-backed stablecoins inefficient, uncompetitive, and unattractive in contrast with international options.”
For Kulechov, nonetheless, the plans may dent the pound-based stablecoin progress potential. He added,
“HM Treasury is more likely to copy this method, turning the UK into one of many least interesting locations to difficulty a stablecoin. That is one other misguided transfer by the Financial institution of England.”
Supply: X
GBP vs U.S dollar-backed stablecoins
For comparability, the U.S. doesn’t restrict the quantity of reserve property which can be investable in yield-bearing merchandise, resembling T-bills. The one key prerequisite is a 1:1 backing for the issued stablecoin.
The enterprise mannequin is profitable as a result of yield. Tether, the USDT issuer, for instance, has made $10B in YTD earnings due to this viable mannequin. About 77% of USDT reserves are parked in T-bills and money equivalents.
Now, some players plan to foyer the U.Okay. authorities to loosen up the restrictions, maybe to reflect the U.S. stance and stay engaging.
That stated, the US greenback enjoys a large moat attributable to its international reserve standing, as evidenced by its substantial overseas reserves.
The macro moat behind USD dominance
In response to the IMF, as of 2025, the USD managed 58% of world overseas reserves, adopted by the Euro (6%) and the Nice British pound, GBP (5%). The Chinese language Renminbi got here in fourth at 2%, however has been rising steadily.
Supply: IMF
Put in a different way, offshore demand for USD is big in comparison with GBP and would cap the expansion of pound-backed stablecoins.
An analogous stance was just lately shared by Chuk Okpalugo, former Product Lead at stablecoin issuer Paxos. In reality, he stated that “folks don’t need stablecoins, they need U.S. {dollars},” particularly within the rising markets.
As of writing, the USD-backed stablecoin commanded 99.8% ($303.7 billion) of the stablecoin market share. Euro-backed merchandise got here in second, whereas the pound-backed section ranks tenth with solely $341k price of property.
Supply: Artemis
