The Bank of England has announced potential transitional limits on stablecoin holdings for individuals and businesses, sparking significant industry reaction in the UK.
This proposal marks a unique regulatory approach, prompting debates over potential impacts on UK’s crypto industry and innovation.
BoE Considers £10-20k Limits for Individuals
The Bank of England's proposal for transitional stablecoin holding limits aims to regulate digital money forms. These caps are intended to give the financial system time to adapt to changing landscapes.
Sasha Mills, BoE Executive Director, suggested limits between £10‑20k for individuals and £10 mn for businesses, though these are not finalised. Feedback from industry stakeholders is being considered.
“Consistent with our position in the November 2023 Discussion Paper, we are also considering introducing holding limits for systemic stablecoins. These limits would be transitional and allow the financial system to adjust to new forms of digital money...” — Sasha Mills, Executive Director, Bank of England
Potential Stifling of Innovation and Liquidity Concerns
The proposed limits could affect liquidity and institutional interest in UK‑based stablecoin ventures. Industry leaders argue such constraints could stifle innovation and competitiveness.
Critics, including Simon Jennings and Tom Duff Gordon, highlight challenges in enforcing such limits and point to other major jurisdictions where caps are deemed unnecessary.
UK's Unique Stance in Global Regulatory Landscape
Unlike prior regulations in the EU and US, these caps are considered atypical. No major economy has set quantitative caps, making the UK’s stance a regulatory outlier.
An industry response emphasizes the risks to innovation and the UK’s crypto competitiveness. Evaluating similar historical regulations suggests a possible chilling effect on market participation.