Crypto industry groups have reportedly urged the Bank of England (BoE) to scrap a proposal to limit stablecoin ownership in the UK, arguing that it would be detrimental to the pound and a “step in the wrong direction.”
BoE Exploring Stablecoin Ownership Cap
On Monday, the Financial Times (FT) reported that crypto groups have heavily criticized one of the Bank of England’s proposed policies, which would establish stricter rules for the UK market than the US or the European Union (EU).
According to the report, the BoE plans to restrict stablecoin ownership in the UK, imposing a limit of £10,000 to £20,000 for individuals and £10 million for businesses on all systemic stablecoins.
The central bank’s plan would be similar to its proposed approach to the digital pound, which sought to address financial stability risks that deposits could flow out of the banking system.
“Applying similar holding limits to stablecoins would allow the Bank to learn more about the extent of bank disintermediation associated with their use and the resulting impact on the cost and availability of credit,” the proposal reads.
In a recent speech, BoE executive director for financial market infrastructure, Sasha Mills, affirmed that the limits would “mitigate financial stability risks stemming from large and rapid outflows of deposits from the banking sector — for example sudden drops in the provision of credit to businesses and households — and risks posed by newly recognised systemic payment systems as they are scaling up.”
However, crypto and payment groups consider that the plan would put the UK at a disadvantage and would be difficult and costly for issuers to implement, hampering the potential benefits of stablecoins, such as cheaper and faster cross-border payments.
“Limits simply don’t work in practice,” Simon Jennings, executive director of the UK Cryptoasset Business Council trade body, told the FT. “Stablecoin issuers don’t have sight of who holds their tokens at any given time, so enforcing caps would require a costly, complex new system, such as digital IDs or constant co-ordination between wallets,” he added.
Meanwhile, Tom Duff Gordon, vice-president of international policy at Coinbase, stated that “imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling. No other major jurisdiction has deemed it necessary to impose caps.”
UK Crypto Regulation Falling Behind?
The BoE previously said its proposed limits on stablecoin ownership could be “transitional” while the financial system adjusts to the growth of digital money, the FT noted. Similarly, BoE’s Deputy Governor for Financial Stability, Sarah Breeden, recently affirmed that officials must be open to “learning as we go,” ahead of the Q4 consultation on its crypto policy proposals.
As reported by Bitcoinist, Sarah Breeden affirmed that the BoE must keep up with the global developments as new payment options emerge, sharing her vision for a “multi-money” system that includes stablecoins and other traditional assets in the UK.
The central bank governor stated that the UK already set out the necessary legislation for a regulatory regime for stablecoins in 2023, while the BoE and the Financial Conduct Authority (FCA) have been engaging with the industry to develop more detailed rules of that regime throughout this year.
FT cited recent comments from Gilles Chemla, a professor at Imperial Business School, who warned that the UK is falling behind on stablecoin regulation: “London has the talent, the markets, and the history to lead the digital economy, but the delay in implementing a regulatory framework for stablecoins is eroding that advantage.”
“Stablecoins are no longer experimental technologies — they are becoming the foundation of the global digital economy,” Chemla stated.
