Bank of England introduces limits on ownership and transactions with stablecoins

Key points:

• The Bank of England will temporarily restrict stablecoin ownership and transactions to protect financial stability.
• Deputy Governor Sarah Breeden said the restrictions will remain in place until the risks to the economy subside.
• The crypto industry has criticized the initiative, arguing that it could stifle innovation and scare away companies.

The Bank of England intends to introduce limits on the ownership and transaction volumes of stablecoins. Bank of England Deputy Governor Sarah Breeden explained that this is a temporary measure aimed at ensuring the stability of the financial system.

The proposed restrictions on stablecoins were first announced in a discussion paper in November 2023 as a means of ensuring financial stability. As the plans progressed in September, industry groups were sharply critical, arguing that they would stifle innovation and restrict growth.

Breeden stated that these measures will enable the real economy’s financing structure to adapt and allow the bank to monitor the introduction of stablecoins, assessing the potential for rapid changes in the financial system’s structure. She added:

“So let me be clear. We would expect to remove the limits once we see that the transition no longer threatens the provision of finance to the real economy.”

Industry groups have criticized the proposed restrictions, previously set in the range of $13 429 to $26 858 (10 000 to 20 000 British pounds). In their opinion, this will send a signal to the entire industry that the UK is becoming a less attractive jurisdiction for cryptocurrency businesses.

Stablecoin rules still under discussion

Breeden said the Bank of England is launching consultations before the end of the year to gather feedback on the limits and how they should be implemented:

“We will be consulting in coming weeks on the detail of our proposed regime for sterling stablecoins used in systemic payment systems, and we’ll be open to feedback as we finalize our rules.”

Among the proposals are an increase in the limit for businesses and an exemption for supermarkets and other large companies.

An exemption for companies operating in the country’s digital “sandbox,” launched in October 2024 to test digital ledger technologies, is also being discussed.