The Bank of England (BoE) has reassured the crypto industry that its proposed limits on stablecoin holdings will only be temporary, emphasizing that the measures are designed to protect the financial system not stifle innovation.
Temporary Caps to Manage Risks
Speaking at DC Fintech Week on October 15, Deputy Governor Sarah Breeden said that the proposed caps set between £10,000 and £20,000 per person and up to £10 million per business are short-term measures intended to prevent sudden liquidity outflows from the traditional banking sector.
The limits, first floated in late November 2024, would apply to all systemic stablecoins operating within the UK. According to Breeden, the policy is meant to give the financial system enough time to adjust to the growing role of stablecoins in payments and financing.
“The goal is to mitigate the risk of rapid outflows from the banking sector that could disrupt access to credit for households and businesses,” she explained.
Criticism and Industry Concerns
The proposed caps have drawn criticism from digital asset advocates who argue that such limits could undermine the UK’s ambitions to become a global hub for crypto innovation.
Several analysts warned that the move might push fintech startups and stablecoin issuers toward more accommodating jurisdictions, especially since no other major economy is currently considering similar restrictions.
However, Breeden pushed back on those concerns, clarifying that the restrictions are not meant to be permanent and that the BoE remains committed to fostering innovation in the payments space.
“We want to support such a role for stablecoins as part of a multi-money system,” Breeden said.
“While proposals for stablecoins to be used for retail and wholesale payments have yet to take off, we know from other areas of tech innovation how quickly new products can grow, especially when they harness large existing user bases.”
Regulation Designed for a “Multi-Money” Future
Breeden noted that the central bank’s approach aims to ensure a smooth transition as stablecoins become part of the UK’s financial ecosystem.
The temporary caps, she said, would allow the BoE to monitor adoption trends, observe market behavior, and determine when it is safe to lift restrictions without threatening credit availability in the real economy.
“We would expect to remove the limits once we see that the transition no longer threatens the provision of finance to the real economy,” Breeden added.
Consultation and Next Steps
The Bank of England plans to launch a public consultation before the end of 2025 to refine its approach. The consultation will seek feedback on:
- The proposed holding limits and their duration.
- Possible exemptions for large businesses.
- Implementation mechanisms and monitoring frameworks.
Breeden also emphasized that regulating such a “dynamic” and fast-moving market requires a framework that is “fit for the future,” balancing innovation with sound risk management.
“We want stablecoin firms to innovate responsibly not by taking higher financial, operational, or conduct risks,” she said.
A Shift in Tone from the BoE
The remarks mark a subtle but notable shift in tone from the central bank, whose Governor Andrew Bailey has long been skeptical of cryptocurrencies. Bailey has previously warned that unregulated stablecoins could ‘threaten the very nature of money’ if not properly overseen.
With the UK seeking to position itself as a leader in digital finance, Breeden’s comments suggest that the BoE is open to stablecoins playing a larger role, as long as financial stability remains protected.
