Key Insights
- Bank of England will keep stablecoin caps until confident they pose no threat to financial stability.
- Planned limits may range £10,000–£20,000 for individuals, with higher caps for businesses.
- BoE will only lift caps after confirming stablecoins do not disrupt credit or the real economy.
The Bank of England will keep proposed limits on stablecoins until it is confident they do not threaten financial stability. Stablecoins, digital assets tied to fiat currencies, have grown in popularity in the UK. BoE Deputy Governor Sarah Breeden said the caps are needed to prevent rapid outflows from bank deposits into stablecoins.
Stablecoin Caps to Protect Credit Flow
The Bank of England stated that sudden movement of deposits into stablecoins could reduce credit available to households and businesses. Breeden said the banking system may struggle to maintain credit if deposits move quickly into stablecoins. She explained the limits could range between 10,000 pounds and 20,000 pounds for individuals. Businesses may face higher caps, while the largest companies could be exempt.
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The central bank noted that its approach differs from other major countries, which currently do not set limits. It is preparing a consultation next month to collect feedback on stablecoin rules. The Bank of England will consider removing limits once it confirms that stablecoins no longer risk the provision of finance to the real economy.
Bank of England Regulatory Framework and Oversight
Under the proposed rules, the Bank of England will regulate systemic sterling stablecoins, those likely to be widely used for payments. Other stablecoins will fall under the Financial Conduct Authority’s oversight, which has a less strict approach. Breeden said the central bank is working with the Treasury to establish a resolution framework for stablecoins. This will ensure that services continue for coinholders if an issuer fails.
Breeden added that Britain is not lagging in cryptocurrency regulation. The Bank of England aims to finalize its framework next year, aligning with targets set by U.S. authorities. She emphasized the importance of careful oversight while allowing the market to grow responsibly.
Industry Response and Future Outlook
The crypto sector has opposed the caps, arguing they may limit adoption and growth. The Bank of England, however, maintains that the rules are necessary to protect the financial system. Feedback from the upcoming consultation will guide any adjustments to the proposed limits.
Breeden confirmed that the Bank of England will monitor market developments before lifting any caps. Large businesses needing higher stablecoin holdings will have exemptions under the framework. The central bank continues to stress that financial stability is its top priority when shaping stablecoin regulation.
