The Bank of England (BoE) is proposing caps on how much stablecoin people and businesses can hold — and it’s causing a stir. Opponents say the plan may do more harm than good for innovation, competitiveness, and digital finance growth.
What exactly is being proposed?
| Who | Proposed Cap |
|---|---|
| Individuals | Between £10,000 and £20,000 worth of systemic stablecoins (Finextra) |
| Businesses | Up to £10 million in stablecoins (Finextra) |
The BoE says these limits would prevent a large outflow of deposits from traditional banks as people shift toward stablecoins, which offer real-time payments, 24/7 availability, and sometimes yields on backing assets (Finextra).
Why people are pushing back
- Competitiveness & innovation: Critics — including Zumo’s founder Nick Jones — argue that no other major country is introducing such strict caps. They warn this could hurt the UK’s digital finance ambitions and accelerate “dollarization” as users move to stablecoins issued abroad (Finextra).
- Enforcement challenges: Tracking how much stablecoin someone holds is technically difficult. Issuers often don’t know who owns which wallet. Enforcement would require digital IDs, complex reporting, and cooperation between private companies and regulators — raising privacy concerns (Finextra).
- Regulatory divergence: While the EU’s MiCA framework regulates stablecoins, it doesn’t impose strict caps. The U.S. is also exploring regulation focused on oversight rather than hard limits, making the UK’s approach an outlier (Finextra).
What BoE says & what’s next
The BoE plans to launch a formal consultation later this year, inviting feedback from the crypto industry, fintechs, and banks before finalizing rules. It’s also exploring limits on returns that users can earn from the assets backing stablecoins, seeking to balance consumer protection with incentives for innovation (Finextra).
Key risks & trade-offs
- Stifling adoption: Overly strict limits may push users toward unregulated offshore stablecoins.
- Competitive disadvantage: UK-based firms might relocate to friendlier jurisdictions, reducing domestic fintech growth.
- Privacy vs oversight: Enforcing caps could mean invasive wallet tracking, risking user privacy.
- Banking sector flight risk: Ironically, caps designed to protect banks could drive users to non-bank alternatives abroad, eroding trust in UK regulation.
What this means for users & businesses
- Stay informed: If you hold stablecoins, watch how these rules evolve — large balances could become restricted.
- Choose compliant platforms: Wallets, exchanges, and payment providers may need to track and report holdings, making provider choice more critical.
- Plan ahead for treasury strategy: Businesses using stablecoins for operations or cross-border payments might need to diversify across currencies or issuers to avoid breaches.
- Expect innovation: Caps may spark new hybrid models like partially regulated stablecoins or pooled products that comply with limits.
Big picture
The Bank of England faces a tightrope act: protecting financial stability without crushing innovation. Stablecoins could transform payments, remittances, and global finance — but if rules are too heavy-handed, the UK risks falling behind in a rapidly evolving space.
The upcoming consultation will signal whether the UK positions itself as a leader in digital assets — or a market where stablecoin growth gets capped before it can fully take off.
