Sarah Breeden, Deputy Governor of the Bank of England, has clarified that the central bank’s intention to limit stablecoin holdings and transaction sizes is a temporary measure meant to maintain stability in the financial system.
The proposed restrictions on stablecoins were initially discussed in a November 2023 paper aimed at ensuring financial stability. As development progressed, industry groups reacted strongly in September, claiming these limits would hinder innovation and restrict growth.
However, during a speech at DC Fintech Week on Wednesday, Breeden stated that the limitations are intended solely as a temporary stopgap, with the central bank ultimately seeking to “support a role for stablecoins as part of a multi-money system.”
Breeden expressed that these measures would allow the “structure of real-economy financing to adapt” to stablecoins while enabling the bank to “monitor adoption of stablecoins and evaluate potential rapid changes in the financial system’s structure.”
“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 vocally opposed the suggested limits, which were initially proposed to range 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 jurisdiction, potentially driving businesses away.
Stablecoin rules are not yet finalized
Breeden announced that the BOE will initiate a consultation before year-end, inviting input on the limit levels and the path to implementation.
“In the coming weeks, we’ll consult on the specifics of our proposed framework for sterling stablecoins utilized in systemic payment systems, and we’ll welcome feedback as we refine our rules,” she mentioned.
One proposed approach is to set a higher limit for businesses and to exempt supermarkets and other large enterprises.
Additionally, a carve-out for companies involved in the country’s digital sandbox, which began in October 2024 as a testing ground for digital ledger technology, is under consideration.
Bank concerned about system capacity with stablecoins
According to Breeden, the BOE’s primary worry is that significant withdrawals from banks into stablecoins could result in a “precipitous drop in credit for businesses and households” if the system is unable to scale effectively.
The objective, she emphasized, is to ensure the financial system has the necessary time to gradually adjust, which is a “critically important issue in the UK, given that credit here depends more on banks compared to, for instance, the scenario in the US.”
“Our starting point is that applying limits to a user’s holdings of a given systemic stablecoin is the best way to avoid such a precipitous reduction in the availability of credit to UK borrowers.”
Central bank aims to remain sole settlement authority for asset markets
Simultaneously, Breeden expressed her belief that wholesale payments and settlements in asset markets should remain under central bank jurisdiction to prevent “unnecessary interconnections in the financial system” and potential stability risks.
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Nonetheless, she also noted that central bank-backed money is not currently employed for all settlements and is unlikely to be in the future, as tokenized markets are expected to include roles for tokenized deposits and regulated stablecoins.
“We can’t, however, achieve this alone. We need the industry — both established players and newcomers — to collaborate with us to engage, experiment, develop use cases, and implement this technology,” Breeden concluded.
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