The Bank of England moved to calm industry concerns this week, emphasizing that proposed limits on stablecoin holdings and transaction sizes are only temporary.
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The central bank aims to give the financial system time to adjust while allowing stablecoins to play a role in the UK’s multi-currency payments system. In a speech at DC Fintech Week, Deputy Governor Sarah Breeden said the central bank’s measures are designed to ensure stability rather than restrict innovation.
“All of these are intended to be temporary to allow the structure of real-economy financing to adjust – and to enable the Bank to monitor adoption of stablecoins and assess the potential for rapid changes in the structure of the financial system,” she explained, noting that rapid shifts could otherwise destabilize the banking system.
Industry Pushback on Proposed Limits
Industry groups had widely criticized the initially proposed thresholds, between $13,429 and $26,858 (10,000–20,000 British pounds), arguing that such caps would signal that the UK is unfriendly to crypto businesses. Critics warned that this could drive innovation and investment overseas, slowing the adoption of digital finance solutions in the country.
Breeden confirmed that the Bank of England will launch a consultation before the end of the year. “We will be consulting in the coming weeks on the details of our proposed regime for sterling stablecoins used in systemic payment systems, and we’ll be open to feedback as we finalize our rules,” she said.
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Proposals under discussion include higher limits for business accounts, exemptions for supermarkets and large firms, and carveouts for participants in the UK’s digital sandbox, launched in October 2024.
Financial Stability Remains the Priority
The Bank’s key concern is that a rapid shift of funds from traditional bank deposits into stablecoins could cause a sudden drop in credit for households and businesses. Breeden noted that this risk is particularly acute in the UK, where credit relies heavily on banks, unlike in the US.
She stressed that central bank-backed money will continue to be pivotal in wholesale payments and asset settlements. However, she acknowledged that tokenized markets will likely see a role for regulated stablecoins and tokenized deposits in the future.
The Bank of England’s approach signals a cautious yet open stance, balancing innovation with financial stability, and leaving the door open for collaboration as stablecoins continue to evolve in the UK market.
This article was written by Jared Kirui at www.financemagnates.com.
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