Industry Experts Call for Reconsideration of Stablecoin Ownership Limits in the UK
In a recent development, various cryptocurrency industry groups have voiced their concerns to the Bank of England (BoE), urging the institution to withdraw its proposed restrictions on stablecoin ownership within the UK. They argue that this move could negatively impact the pound and represent a counterproductive step for the financial landscape.
BoE’s Proposal to Cap Stablecoin Holdings
According to a report by the Financial Times, the Bank of England’s proposal has attracted significant criticism from key crypto groups. The policy in question aims to implement stricter regulations in the UK compared to those enforced in the United States or the European Union. The BoE’s plan involves capping stablecoin holdings at £10,000 to £20,000 for individuals and £10 million for businesses for all systemic stablecoins. This initiative mirrors the BoE’s approach to the digital pound, intended to mitigate potential financial stability risks associated with the outflow of deposits from traditional banks.
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Details of the BoE’s Proposal
The bank’s proposal states, “By applying similar holding limits to stablecoins, the Bank can gain insights into the extent of bank disintermediation due to their usage, as well as the resulting impacts on credit cost and availability.” Sasha Mills, the BoE’s executive director for financial market infrastructure, emphasized in a speech that such limits would help manage financial stability risks arising from rapid, large-scale deposit outflows. This could include sudden reductions in business and household credit or challenges posed by emerging systemic payment systems.
Industry’s Stance on BoE’s Plans
Despite these intentions, crypto and payment groups believe that the proposed restrictions could place the UK at a competitive disadvantage. Implementing these limits would be challenging and costly for stablecoin issuers, potentially stifling the advantages of stablecoins like reduced costs and faster cross-border transactions. Simon Jennings, the executive director of the UK Cryptoasset Business Council, explained to the Financial Times, “Limits are impractical. Stablecoin issuers lack visibility on token holders at any given moment, necessitating a complex, costly new system such as digital IDs or constant coordination among wallets to enforce caps.”
Furthermore, Tom Duff Gordon, Coinbase’s vice-president of international policy, criticized the proposal, stating, “Imposing caps on stablecoins harms UK savers, the City, and the sterling. No other major jurisdiction has found it necessary to implement such caps.”
UK’s Position in Global Crypto Regulation
Previously, the BoE mentioned that the proposed stablecoin ownership limits could be “transitional” as the financial system adapts to the digital currency landscape. The Financial Times highlighted that Sarah Breeden, the BoE’s Deputy Governor for Financial Stability, urged officials to remain receptive to learning as the crypto policy proposals are refined. Breeden emphasized the importance of staying aligned with global advancements as new payment solutions emerge, envisioning a “multi-money” system that incorporates stablecoins alongside traditional assets in the UK.
Regulatory Developments in the UK
The UK’s regulatory groundwork for stablecoins was established in 2023, with ongoing collaborations between the BoE and the Financial Conduct Authority (FCA) to develop comprehensive rules within this framework. Despite these efforts, concerns persist that the UK is lagging behind other regions in stablecoin regulation. Gilles Chemla, a professor at Imperial Business School, cautioned that the UK’s delay in implementing a regulatory framework could erode its advantage in leading the digital economy. Chemla remarked, “Stablecoins are no longer experimental technologies—they are becoming foundational to the global digital economy.”
Conclusion
As the Bank of England deliberates its next steps, the debate around stablecoin ownership limits continues to unfold. The outcome of this discussion could shape the UK’s position in the evolving global digital economy, influencing its competitiveness and ability to harness the benefits of financial innovation.
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