Sarah Breeden, Deputy Governor of the Bank of England, has emphasized that the central bank’s strategy to limit stablecoin holdings and transaction sizes will be a temporary measure aimed at maintaining financial stability.
The initial proposal for stablecoin limits was introduced in a November 2023 discussion paper to ensure financial stability. However, as discussions evolved, industry groups voiced strong opposition in September, claiming that such limits could hinder innovation and impede growth.
In her address at DC Fintech Week on Wednesday, Breeden stated that the limits are meant as a temporary solution, with the bank’s ultimate goal being to “support a role for stablecoins within a multi-money system.”
Breeden noted that these measures are designed to help the “structure of real-economy financing adapt” to stablecoins and allow the bank to “monitor stablecoin adoption and evaluate potential rapid shifts in the financial system’s structure.”
“Let me be clear. We expect to lift the limits once we determine that the transition no longer jeopardizes the financing of the real economy.”
Industry representatives have widely condemned the proposed limits, originally suggested to be between $13,429 and $26,858 (10,000 and 20,000 British pounds), arguing they would signal that the UK is not a crypto-friendly environment and could deter businesses.
Stablecoin regulations are still under review
Breeden mentioned that the BOE is preparing a consultation to gather feedback on the proposed limits and the implementation pathway before the year’s end.
“In the coming weeks, we will consult on the details of our proposed framework for sterling stablecoins used in systemic payment systems, and we welcome feedback as we finalize our regulations,” she indicated.
One suggestion on the table is a higher limit for businesses and an exemption for supermarkets and large companies.
There’s also ongoing discussion about a carveout for entities operating within the country’s digital sandbox, which was launched in October 2024 as a testing environment for digital ledger technology.
Bank concerned about system’s adaptability to stablecoins
Breeden expressed that the BOE’s primary worry is that significant withdrawals from banks into stablecoins could cause a “sudden decline in credit for both businesses and households” if the system fails to scale up rapidly.
The focus, she explained, is to give the financial system ample time to adjust gradually, which is critical in the UK, where credit heavily relies on banks, in contrast to the US.
“We believe that placing limits on a user’s holdings of a specific systemic stablecoin is the optimal approach to prevent a severe drop in credit availability for UK borrowers.”
Central bank aims to maintain role as sole settlement for asset markets
Meanwhile, Breeden conveyed her belief that wholesale payments and settlements within asset markets should remain under the purview of the central bank to avoid “unnecessary links in the financial system” and potential stability risks.
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However, she also acknowledged that central bank-backed money is not currently employed for all settlements and likely won’t be in the future, as tokenized deposits and regulated stablecoins may play a role in tokenized markets.
“We cannot achieve this alone. We need collaboration from the industry — both existing players and new entrants — to engage, experiment, develop use cases, and deploy this technology,” Breeden concluded.
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