The Bank of England (BoE) has faced a wave of criticism from payments and cryptocurrency industry groups since announcing the intent to impose strict limitations on the amount of systemic stablecoins a person could own in the UK.
According to a report by Financial Times, the proposal from the BoE would allow individuals to own only between £10,000 and £20,000 ($13,500 and $27,000) of systemic stablecoins and only enable businesses to own up to £10 million.
The BoE suggests this level of limitation is necessary to limit the risk of stablecoins removing deposits from banks, which would destabilize the supply of credit to households and businesses.
Even though the Bank of England is suggesting that the limitations would be appropriate to avoid “risks to financial stability,” critics of the regulations suggest they could make the UK one of the most restricted jurisdictions for stablecoins in the world, exceeding the amount of caution seen in the US and EU.
Industry Leaders Warn of Competitive Disadvantage
Crypto industry leaders vehemently oppose prejudice against stablecoins, arguing that limits would undermine the UK’s ambition to become a global hub for digital finance.
“Caps on stablecoins harm UK savers, harm the City, and harm sterling,” said Tom Duff Gordon, Coinbase’s vice-president of international policy.
He commented that no other major economy had put forward such limits.
“Stablecoins can provide demonstrable benefits, such as cheaper and faster payment options for cross-border payments, and the future of the whole digital finance ecosystem in the UK is at stake if we take restrictive action instead of proper regulation.”
Industry leaders argued that restrictive limits on stablecoins would force businesses and investors to relocate to more favourable innovation environments.
Also Read: Bank Of England Intensifies Scrutiny Over Crypto Activities, Requests Firms’ Disclosures By March
Enforcement Concerns Add to Backlash
Beyond worries about competitiveness, skeptics have claimed that limits on ownership would also be infeasible.
Simon Jennings, executive director of the UK Cryptoasset Business Council, pointed out that it is very challenging for stablecoin issuers to track who owns their tokens, so caps would be exceedingly difficult to enforce without intrusive processes like a digital ID or tracking wallets all the time.
In his view, the proposal was expensive, inconvenient, and unrealistic.
These stresses are exacerbating divisions between the BoE and the Treasury, particularly after the intervention of Gov. Andrew Bailey to stop a meeting in which Chancellor Rachel Reeves was moving to exert pressure to cool off the pace of Fintech regulation.
Also Read: Morocco’s Central Bank Finalizes Comprehensive Draft Legislation to Regulate Crypto
Calls for the UK to Catch Up With Global Stablecoin Regulation
While the BoE is adamant that the capped transactions may be “transitional,” industry analysts believe that delays and prohibitive measures have already diminished the UK’s competitive edge.
Internationally, the stablecoin market has grown to $288 billion, and US approved the Genius Act on July 18th, UnoCrypto reported.
The bill aims to clarify the regulatory framework, causing projections that rise from $288 billion to $1.2 trillion by 2028.
Riccardo Tordera-Ricchi of The Payments Association likened the caps to limiting cash, or bank deposits, and branded them “a step in the wrong direction.”
Gilles Chemla, lecturer at Imperial Business School, used equally grave language and cautioned that London is in danger of falling behind in terms of talent and global leadership in finance.
Also Read: JPMorgan Says Regulators Back Tokenised Bank Deposits More Than Stablecoins
Wider BoE Scrutiny of Crypto Markets
This debate about stablecoin limits comes at a time when the BoE is intensifying its wider scrutiny of digital assets.
On May 31st, Michael Saylor stated that the BoE may one day develop a Bitcoin reserve.
This came in the wake of political momentum developing for a new UK Crypto and Digital Finance Bill that hopes to provide some better tax rules and protections for user wallets, UnoCrypto reported.
Only weeks later, on June 19th, we reported that the BoE was considering forcing new regulations on banks that would cap their exposure to cryptocurrencies by 2026.
Although the UK government is dedicated to making the country a global hub for innovation in the crypto space, the BoE continues to emphasise financial stability.
There is an evident debate continuing as to whether regulation will help or hinder the UK’s position in the digital economy.
Also Read: German Bank Sparkassen Plans To Offer Crypto Trading Access To 50 Million Customers By 2026