The Bank of England will impose “temporary” limits on stablecoin holdings to protect credit availability, but has not specified when the caps will be lifted, Deputy Governor Sarah Breeden confirmed on Tuesday.
The central bank plans limits of £10,000-£20,000 for individuals and £10 million for businesses on systemic stablecoins used for payments.
Breeden stated, “we would expect to remove the limits once we see that the transition no longer threatens the provision of finance to the real economy.”
However, the consultation paper arriving later this year provides no timeline or metrics defining when that threshold would be met.
The approach contrasts with the U.S., where Congress passed the GENIUS Act in July, establishing federal stablecoin regulation without ownership caps.
Tom Duff Gordon, Vice President of International Policy at Coinbase, earlier told the Financial Times that “imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling,” noting that no other major jurisdiction has deemed caps necessary.
Deputy Governor Sarah Breeden | Source: WSJ
According to Breeden, the Bank of England will provide accounts to systemic stablecoin issuers, allowing them to hold reserves at the central bank and earn returns by investing a portion in short-term UK government debt.
The consultation will outline a potential liquidity facility to help solvent issuers monetize assets during redemption pressure.
Breeden emphasized that this position puts the Bank in the role of “banker to systemic issuers,” thereby avoiding reliance on commercial banks for accounts.
The arrangement mitigates financial stability risks associated with the interconnectedness observed during Circle’s USDC de-pegging in March 2023, following the failure of Silicon Valley Bank.
Earlier this month, Governor Andrew Bailey explained that rapid deposit outflows into stablecoins could cause “a precipitous drop in credit for businesses and households” if banks cannot quickly scale wholesale financing from insurers and funds.
Speaking with Cryptonews, Varun Paul, former Head of the Fintech Hub at the BoE, noted Bailey is “lifting the hood on the deep economic and policy questions” surrounding stablecoins for the first time, including whether greater separation between payments and credit creation is sustainable.
Paul added that Bailey “opened the door to using some regulatory features for non-bank stablecoin issuers—perhaps a stablecoin can have FSCS protection if the issuer contributes to the scheme.“
