Bank of England Defends Stablecoin Caps as Temporary Measure to Ensure Stability
The Bank of England’s proposed restrictions on stablecoins are temporary in nature, according to Deputy Governor Sarah Breeden. The central bank is only concerned about the possible impact on the country’s financial system. 
Speaking at DC Fintech Week on October 15, Breeden addressed industry concerns about the central bank’s proposal to limit individual stablecoin holdings to between 10,000 and 20,000 pounds per person and up to 10 million pounds per company for all systemically important stablecoins in circulation. The proposed limits were designed as a means of mitigating financial stability risks associated with large and rapid outflows of deposits from the banking sector.
Temporary Restrictions to Ease Outflows
The central banker said the caps were designed to ease outflows from the banking sector, which could affect access to credit for households and businesses if the system does not adapt in a timely manner. Critics of the proposal argue that the decision could undermine Britain’s ambitions to become a global hub for digital assets. They warned that such restrictions on stablecoin usage could spur innovation and investment in more accommodating jurisdictions, with the UK being the only major jurisdiction considering such a move.
However, according to Breeden, the restrictions are only temporary and the bank wants to use stablecoins for “retail and wholesale payments.” The bank aims to support the development of stablecoins as part of a multi-money system, while ensuring that the structure of real economy financing can adapt to their presence. Breeden emphasized that regulating the “dynamic” stablecoin market can be challenging, but that the bank is working to create a stablecoin regulatory system that is “fit for the future.”
Upcoming Consultation and Regulatory Framework
The Bank of England is expected to launch a consultation before the end of 2025 to collect feedback on the proposed holding limits, possible exemptions for larger companies, and practical approaches for implementation. The consultation will aim to refine the rules and ensure that the regulatory framework is effective in managing the risks associated with stablecoins. According to Breeden, the bank wants to obtain feedback on the implementation of these limits in practice and on other approaches to achieving their goals.
Bank of England Governor Andrew Bailey is a long-time crypto skeptic and has warned that stablecoins threaten the nature of money if not properly regulated. The bank’s proposed measures are intended to ensure that the financial system can adapt to the presence of stablecoins, while minimizing the risks associated with their use. For more information on the Bank of England’s proposed restrictions on stablecoins, visit https://crypto.news/bank-of-england-defends-stablecoin-caps-as-a-temporary-measure-to-ensure-stability/
