Bank of England Proposes Stablecoin Holding Caps Amidst Lawmaker and Industry Concerns
The Bank of England (BoE) has proposed new caps on stablecoin holdings, setting limits at £20,000 for individuals and £10 million for businesses, with possible exemptions for larger firms. These caps roughly translate to $26,350 for individuals and $12.7 million for businesses. Additionally, the regulations would impose restrictions on how issuers manage backing assets for systemic sterling-backed stablecoins used in daily payments. Specifically, issuers could hold up to 60% of backing assets in short-term UK government debt, while the remaining 40% must be held in non-interest-bearing Bank of England accounts.
These proposed rules are targeted at systemic stablecoins and would not apply to existing stablecoins regulated by the UK's Financial Conduct Authority (FCA), such as USDT. The proposals are currently in consultation, with the BoE noting that the measures could be modified or removed in the future.
A group of British lawmakers, including Lords Peter Cruddas, Emma Pidding, David Goddard, Kulveer Singh Ranger, Jonathan Berry, and Members of Parliament such as Gavin Williamson, have urged reconsideration of these caps. They warn that such restrictions could lead to a fragmented and restrictive UK market, pushing stablecoin activity overseas. The lawmakers called for the UK to adopt international benchmarking in its regulatory approach.
CryptoUK, representing the industry, welcomed the move towards regulation but cautioned against strict caps. They advocate for a proportionate and internationally benchmarked regulatory framework to ensure the UK remains competitive and innovative in the crypto sector.
