The UK faces significant pushback from its crypto industry regarding the Bank of England's proposal to impose limits on stablecoin holdings.
Rationale Behind the Limits
The Bank of England has proposed plans to cap the amount individuals and businesses can hold in systemic stablecoins, aiming to protect financial stability and mitigate the risk of large deposit outflows from banks. Individuals could face limits between £10,000 and £20,000 (~US$13,600–$27,200), while businesses might be capped at around £10 million (~US$13.6 million).
Industry Pushback
Industry representatives argue that the proposed caps are 'unworkable.' Tom Duff Gordon from Coinbase stated that the limits would harm UK savers and the City of London. Simon Jennings from the UK Cryptoasset Business Council highlighted the enforcement challenges, noting that it would require costly new identity systems, as issuers typically do not track token holders. Riccardo Tordera-Ricchi from the Payments Association added that such restrictions are as illogical as capping cash or bank account balances.
Potential Solutions
Officials like Sasha Mills, Executive Director for Financial Market Infrastructure, suggest that large stablecoin balances could spark sudden outflows that may weaken banks' deposit bases. Nonetheless, critics propose smarter alternatives, such as stronger reserve rules for issuers, tighter governance and oversight standards, or regulation focused on issuance and redemption rather than imposing limits on holdings.
The proposed stablecoin limits have sparked significant debate within the industry, raising questions about the balance between regulation and the support of innovation within the crypto space.
