Cryptocurrency industry groups are pressing the Bank of England to abandon proposed limits on stablecoin ownership, arguing the restrictions would make Britain less competitive than the United States and European Union in digital asset regulation.
What to Know:
- The Bank of England proposes caps of £10,000-£20,000 for individuals and £10 million for businesses on systemic stablecoins
- Industry executives argue enforcement would be nearly impossible and no other major jurisdiction has imposed such limits
- The U.S. and EU have implemented stablecoin frameworks without ownership caps, focusing instead on reserves and oversight
Industry Opposition Mounts Against Restrictive Framework
The Financial Times reported Monday that central bank officials plan to impose ownership caps ranging from £10,000 to £20,000 ($13,600–$27,200) for individual holders. Business entities would face a ceiling of approximately £10 million ($13.6 million) on holdings of systemic stablecoins.
The Bank of England defines systemic stablecoins as tokens already widely used for payments in Britain or expected to gain such adoption. Officials justify these restrictions as necessary safeguards against sudden deposit outflows from traditional banks that could undermine credit provision and broader financial stability.
Sasha Mills, the central bank's executive director for financial market infrastructure, defended the approach by citing risks from rapid deposit withdrawals and the potential scaling of new systemic payment systems. The regulatory framework aims to prevent scenarios where large-scale stablecoin adoption could drain bank deposits.
However, senior industry figures dismissed the proposal as fundamentally flawed.
Tom Duff Gordon, Coinbase's vice president of international policy, characterized the caps as harmful to British savers and the City of London's financial sector. He emphasized that "imposing caps on stablecoins is bad for U.K. savers, bad for the City and bad for sterling."
Simon Jennings of the UK Cryptoasset Business Council questioned the practical implementation of such limits. He suggested enforcement would prove nearly impossible without establishing new infrastructure systems, including comprehensive digital identity verification mechanisms.
Global Regulatory Approaches Differ Significantly
The Payments Association's Riccardo Tordera-Ricchi argued the limits "make no sense" given the absence of comparable restrictions on traditional cash holdings or bank account balances. This criticism highlights a fundamental inconsistency in the proposed regulatory treatment of digital versus traditional monetary instruments.
The United States enacted the GENIUS Act in July, establishing a federal framework for payment stablecoins without imposing ownership caps. The legislation sets licensing requirements, reserve standards and redemption protocols for issuers while allowing unlimited individual holdings.
The European Union implemented its Markets in Crypto-Assets Regulation (MiCA) with stablecoin-specific provisions taking effect June 30, 2024. Broader crypto-asset and service provider rules became operative December 30, 2024. Like the American approach, MiCA emphasizes reserves, governance structures and oversight by national regulators rather than restricting holder amounts.
These international frameworks suggest Britain's proposed ownership caps represent an outlier approach. Both the U.S. and EU have prioritized issuer regulation and reserve requirements over direct limitations on consumer and business holdings.
Understanding Stablecoins and Regulatory Concerns
Stablecoins are cryptocurrencies designed to maintain stable value relative to reference assets, typically government-issued currencies like the U.S. dollar or British pound. Unlike volatile cryptocurrencies such as Bitcoin or Ethereum, stablecoins aim to provide price stability for payments and transfers.
Regulatory authorities worldwide have expressed concerns about stablecoins' potential impact on traditional banking systems. The worry centers on scenarios where widespread stablecoin adoption could lead to significant deposit outflows from commercial banks, potentially constraining their ability to provide credit to the broader economy.
Central banks also fear that large-scale stablecoin networks could develop into systemically important payment infrastructures operating outside conventional regulatory oversight. This concern has driven various national approaches to stablecoin regulation, though most have focused on issuer requirements rather than user restrictions. The Bank of England's proposed caps represent an attempt to limit systemic risk by constraining the scale of individual and business stablecoin holdings. However, critics argue this approach addresses symptoms rather than underlying structural issues in stablecoin regulation.
Closing Thoughts
The Bank of England's proposed stablecoin ownership limits face mounting industry opposition and unfavorable comparisons to international regulatory approaches. While officials cite financial stability concerns, industry groups question both the practical feasibility and competitive implications of such restrictions for Britain's digital asset sector.