Cryptocurrency entities in the United Kingdom are not taking lightly the Bank of England's (BoE) latest decision regarding stablecoin ownership by both individuals and businesses. They insist that such restrictions could pull the UK backwards while other regions, including the U.S. and the EU, embrace innovation.
According to a report by the Financial Times, the crypto firms are insisting that the BoE abandon plans to impose the restrictions.
BoE to Limit Stablecoin Ownership
In 2023, the BoE published a consultation paper proposing a regulatory regime for stablecoins. In an attempt to ensure financial stability in the economy, the BoE proposed limits of £10,000 ($13,600) to £20,000 ($27,230) for individuals holding stablecoins. Business, on the other hand, will have limits of £10 million ($13.6 million).
The central bank recently decided to follow through on the proposals it made in that discussion paper. If imposed, these limits will apply to all systemic stablecoins, which refers to any that is used for UK payments.
The bank’s ongoing attempts can be linked to concerns that stablecoins could weaken the UK banking system. BoE officials are concerned that the increasing use of stablecoins could erode the traditional financial system's deposits, resulting in rapid outflows from the banking sector.
Backlash From Crypto Groups
Despite the BoE's concerns, crypto groups in the UK insist that such restrictions would keep the country at a disadvantage compared to other crypto markets. The EU has taken the lead by enacting the Markets in Crypto-Assets (MiCA) regulatory framework in 2023. The U.S. followed suit two months ago by signing the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) into law.
Criticisms against the UK's approach have come from local leaders of major crypto firms, including Coinbase. Top figures from finance associations, such as the Cryptoasset Business Council and The Payments Association, have also expressed their disapproval of the BoE's plans. Most insist the central bank's efforts are a step in the wrong direction.
Coinbase's VP for international policy, Tom Duff Gordon, said: "Imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling. No other major jurisdiction has deemed it necessary to impose caps."
The latest development comes as the total stablecoin market cap surpasses $303 billion this year. Market experts predict that the sector could be worth $1.2 trillion before the end of this decade.
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