Bank of England Signals Flexibility on Stablecoin Caps Following Industry Concerns

• Bank of England signals openness to revising stablecoin holding caps after industry criticism.
• Proposed limits aim to prevent large deposit shifts from banks into stablecoins.
• Industry warns caps and reserve rules could complicate stablecoin adoption in the UK.

The Bank of England has stated it may reconsider proposed limits on stablecoin holdings after criticism from crypto companies and financial technology firms. During a hearing before the House of Lords Financial Services Regulation Committee, Deputy Governor Sarah Breeden said the central bank remains open to alternative approaches to managing risks linked to stablecoins without relying solely on strict caps.

The proposal, first introduced in November, aims to prevent sudden shifts of deposits from banks into digital tokens that could disrupt the UK financial system.

Regulators Review Stablecoin Holding Limits

The Bank of England originally proposed temporary holding limits of £20,000 for individuals and £10 million for businesses on stablecoins that regulators classify as systemically important. The measure was designed to reduce the risk that consumers and companies could rapidly transfer funds out of bank deposits and into digital assets.

Breeden stated to lawmakers that the objective of the limits is to support stability while the financial system adapts to the growing use of stablecoins. She said regulators are considering feedback from the digital asset industry and are prepared to examine other methods that could address the same concerns.

According to Breeden, the UK’s financial system relies heavily on bank deposits to fund lending to households and businesses. This structure differs from the United States, where financial markets play a larger role in providing credit. As a result, regulators believe the UK economy could be more exposed if large volumes of deposits shifted into stablecoins.

Related: Stablecoin Market Cap Exceeds $307B as Ripple Urges Central Bank Integration Policy

Industry Raises Practical and Operational Concerns

Digital asset companies have warned that the proposed caps could prove difficult to implement and may limit the development of the UK’s stablecoin market. 

Breeden acknowledged that enforcing holding limits may present technical challenges, particularly once stablecoins begin circulating on secondary markets. Being that tokens can move freely between users, tracking how many are held by each individual or business may be difficult.

Industry participants have also raised concerns about additional requirements in the draft rules. Under the proposal, stablecoin issuers would need to keep at least 40% of their backing assets in unremunerated deposits at the central bank.

Some companies argue that the limits could restrict practical business use of pound-denominated stablecoins. Others have questioned whether monitoring wallet balances across global markets would impose significant administrative burdens.

FCA Sandbox Explores Pound Stablecoin Development

Despite the debate over regulation, several firms are exploring potential uses for pound-denominated stablecoins through the UK Financial Conduct Authority’s regulatory sandbox.

Revolut, which has more than 60 million customers, is among the companies expected to explore issuing a stablecoin once the regulatory framework is finalized. 

Monee Financial Technologies is testing settlement infrastructure for tokenized securities while also participating in the Bank of England’s Digital Securities Sandbox.

Related: UK Regulators Unveils Plans to Regulate Stablecoins, Cites Risks to Financial Stability