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VISTORBELITUNG.COM,LONDON, The Bank of England (BoE) has moved to clarify its controversial proposal to cap stablecoin holdings, assuring the industry that the restrictions are a temporary measure intended to safeguard financial stability and will be removed once digital assets no longer pose a systemic risk to the economy.
The central bank's Deputy Governor, Sarah Breeden, confirmed the plan in a recent speech, signaling that the BoE ultimately aims to "support a role for stablecoins as part of a multi-money system." This statement comes as a response to widespread backlash from industry groups who argued the initial proposal which floated limits of around £10,000 to £20,000 for individuals would stifle innovation and undermine the UK's position as a crypto-friendly jurisdiction.
The core concern driving the BoE's cautious stance is the potential for "precipitous drop in credit for businesses and households" if a mass, rapid outflow of deposits from traditional banks into stablecoins were to occur. Stablecoins, digital currencies pegged to a stable asset like the British pound, offer round-the-clock convenience and could potentially disrupt the traditional banking model where deposits are the primary source of credit creation.
Breeden stated that applying holding limits is considered the best immediate way to "mitigate the risk of a disorderly transition" and allow the Bank to learn more about the stablecoins' potential impact on the cost and availability of credit. The limits, therefore, act as a temporary stopgap while the Bank and other regulators, like the Financial Conduct Authority (FCA), finalize a detailed and permanent regulatory framework for systemic stablecoins.
The initial proposals, first introduced in a 2023 discussion paper, met with immediate and strong criticism. Cryptoasset business councils and major firms like Coinbase warned that imposing caps would be detrimental to UK savers and the British pound, suggesting that no other major jurisdiction has proposed such strict limitations. Furthermore, critics argued that the restrictions would be nearly impossible to enforce due to the decentralized nature of digital wallets.
In response to this pressure, the BoE is reportedly already considering exemptions for certain businesses, such as exchanges, that have a legitimate operational need to hold larger amounts of stablecoins. Discussions are also underway for potential higher limits for businesses compared to individuals.
While the Bank asserts the temporary nature of the caps, the message is clear: the path to a fully integrated digital asset landscape will be deliberately paced to ensure the stability of the UK's financial foundations. The BoE is expected to publish a formal consultation on its updated stablecoin regime later this year.