The Bank of England (BoE) has unveiled its UK stablecoin regulation proposal. The measure introduces temporary holding limits. Sarah Breeden, the bank’s Deputy Governor, defended the necessity of the restrictions. These include a £20,000 cap for individuals.
The consultation paper details a strict regime. It will apply to systemic stablecoins denominated in sterling. Companies will face a £10 million limit. Breeden justified the caps as a measure to prevent rapid deposit outflows from commercial banks. The BoE fears this could threaten credit availability. Furthermore, the proposal revises the composition of backing assets. Issuers will be allowed to hold up to 60% in UK government debt and 40% in BoE deposits.
However, the crypto industry has reacted with harsh criticism. Executives consider the measure “overly cautious”. It compares unfavorably with the US approach. Tom Duff Gordon of Coinbase stated that the limits are “bad for UK savers.” He argues that no other major jurisdiction has imposed such caps.
Is the UK stifling crypto adoption with this move?
Criticism on the X platform was blunt. One user called the approach “absurd”. Another warned that the “draconian” regulation is keeping a cap on the European crypto world. Critics fear that the limits will force users to move their funds into riskier assets. This contradicts the BoE’s goal of safety. The concern is that adoption is being restricted rather than managed.
Breeden insisted that the caps are temporary. They will be removed once the transition no longer poses a risk. Nonetheless, the document offers no clear timeline. The UK stablecoin regulation proposal seeks a balance. It aims to weigh innovation against stability. But the caps have created a sharp division. The global stablecoin market exceeds $305 billion. In contrast, sterling-pegged tokens barely reach $1.65 million, according to DeFiLlama.
