BoE open to scrapping stablecoin limit idea after backlash

Industry groups have criticized the UK’s proposed stablecoin holding limits, arguing they would signal that the UK is hostile to crypto and stifle innovation.

Bank of England Deputy Governor Sarah Breeden told UK lawmakers that the central bank is open to alternative ways to manage stablecoin risks other than imposing holding limits.

Speaking before the House of Lords Financial Services Regulation Committee on Wednesday, Breeden said the proposed holding limits are designed to prevent a mass migration of deposits from banks into stablecoins, arguing it could curtail lending and reduce credit availability for businesses and households.

“We are genuinely open to other ways of achieving the objective. I think you've heard from other people as part of your inquiry that this risk to the provision of credit is real.” 

“We proposed holding limits as a way of managing that risk. We are open to feedback on other ways of achieving it. But I think you would expect us as the financial stability authority to ensure that there isn't a precipitous drop in credit to the businesses and households in the UK,” Breeden added. 

Industry groups have criticized the proposed limits, floated at between 10,000 and 20,000 British pounds ($13,368 to $26,733), arguing it would signal that the UK is hostile to crypto and drive businesses offshore, while stifling innovation and undermining economic growth.

Self-custody wallets holding stablecoins not “permissible”

Last November, the Bank of England released a consultation paper outlining its proposed regulatory framework for sterling-denominated systemic stablecoins, inviting public feedback through Feb. 10. 

The central bank flagged that it would continue monitoring the risks associated with unhosted wallets, such as reduced oversight of transactions. 

However, Breeden ruled out self-custody wallets holding stablecoins, telling lawmakers that users holding stablecoins in self-custody wallets outside regulated entities such as exchanges won’t be covered by the UK’s regulatory regime. 

“There is this concept of an unhosted wallet, you haven't got a wallet provider who is a regulated entity who is ensuring that AML [anti-money laundering] KYC [know your customer] criteria are complied with. Unhosted wallets will not be permissible in the UK; they are permissible in the US regime,” Breeden said.