Bank of England's Proposed £10,000-£20,000 Stablecoin Cap Faces Strong Industry Opposition

The Bank of England (BoE) is facing significant backlash from the cryptocurrency industry over its proposal to cap individual stablecoin holdings at £10,000 to £20,000. This measure, outlined in a 2023 consultation paper, aims to mitigate "systemic risk" within the financial system. However, prominent figures like Stani.eth, founder of Aave, have publicly criticized the plan, stating, > "This is absurd, and we need to push back against this kind of regulation."

The central bank's rationale behind these proposed limits is to safeguard financial stability by preventing large-scale outflows of deposits from traditional banks into stablecoins. Officials, including BoE executive director Sasha Mills, argue that such restrictions are necessary to reduce risks associated with sudden deposit withdrawals and the rapid scaling of new systemic payment systems. The move seeks to protect the credit supply and overall financial health of the UK.

Crypto industry leaders contend that the proposed caps are "unworkable" and nearly impossible to enforce. Simon Jennings of the UK Cryptoasset Business Council highlighted that stablecoin issuers often cannot monitor individual holdings across multiple wallets, suggesting that enforcement would necessitate complex and costly systems like digital IDs. Riccardo Tordera-Ricchi of The Payments Association further noted the inconsistency, stating that such limits "make no sense" given the absence of caps on cash or traditional bank accounts.

Critics also warn that the stringent regulation risks stifling innovation and driving crypto businesses and users away from the UK. Tom Duff Gordon, Vice President of International Policy at Coinbase, asserted that "imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling." He underscored that no other major jurisdiction has deemed such limits necessary, potentially positioning the UK at a disadvantage in the global digital economy.

The UK's approach stands in stark contrast to recent regulatory developments in other major economic blocs. The United States, through the GENIUS Act passed in July, established a comprehensive licensing and reserve framework for stablecoin issuers without imposing any holding limits. Similarly, the European Union's Markets in Crypto-Assets Regulation (MiCA), now fully in effect, focuses on robust reserves, governance, and oversight rather than restricting individual ownership.

While the BoE suggests these limits could be transitional, the debate highlights a fundamental divergence in regulatory philosophy. Industry proponents view stablecoins as a tool for modernizing payments and savings, whereas the central bank prioritizes stability and the prevention of potential systemic disruption. The upcoming official consultation from the BoE is expected to further shape the future of stablecoin regulation in the UK amidst this ongoing contention.