The BoE intends to temporarily maintain limits on stablecoin holdings to safeguard the UK’s financial system.
The Bank of England clarified that the restrictions on stablecoins are a transitional solution, not a permanent stance. Speaking at the DC Fintech Week conference, Deputy Governor Sarah Breeden reiterated that the central bank aims to remove these limits once the financial system has fully adapted to these new payment instruments.
The restrictions were first proposed in a discussion paper published in November 2023, designed to protect the stability of the UK’s financial system. The proposal drew criticism from industry groups last September, who argued that the limits would stifle innovation and harm the UK’s reputation as a digital-friendly jurisdiction.
The central bank’s main goal is to allow the “real economy to gradually adapt” to the integration of stablecoins, while continuously monitoring adoption and assessing potential risks from rapid shifts in the financial system’s structure. Breeden stressed that the limits are a temporary mechanism:
“I want to be very clear. We expect to remove the limits on stablecoins once we can verify that the transition no longer poses a threat to the provision of financing to the real economy.”
The Bank of England’s main concern is that rapid and large-scale transfers of funds from traditional bank accounts into stablecoins could lead to “a sharp reduction in lending to businesses and households.” Setting caps on how much stablecoin a single user can hold has been identified as the most effective way to prevent a dangerous contraction in credit access for UK borrowers.
