UK Crypto Industry Pushes Back Against Bank of England’s Stablecoin Caps
The Bank of England’s recent proposal to impose limits on individual stablecoin holdings has drawn sharp criticism from key players within the United Kingdom’s cryptocurrency sector. The central bank’s November 2023 discussion paper suggested capping digital pound holdings between £10,000 and £20,000, with consideration of a lower threshold at £5,000, prompting industry stakeholders to express significant concerns.
Industry Groups Highlight Practical and Competitive Challenges
Simon Jennings, executive director of the UK Cryptoasset Business Council (UKCBC), echoed these sentiments, stating, “Limits simply don’t work in practice.” He explained that stablecoin issuers typically lack real-time visibility into token holders, making enforcement prohibitively complicated. Jennings also stressed that the Bank of England’s proposal could hamper initiatives to establish efficient cross-border stablecoin payment corridors, especially between the UK and the United States.
Regulatory Concerns Over Financial Stability and Currency Substitution
Similar concerns have been voiced internationally. European Central Bank President Christine Lagarde recently urged policymakers to address regulatory gaps around stablecoins. She cautioned that lenient US policies could trigger a shift of euro deposits to the US, strengthening the dollar’s dominance in cross-border transactions and potentially eroding fee revenues and data control within the eurozone.
Banking Sector Fears and Industry Responses
Some crypto industry leaders advocate for banks to enhance their competitiveness by offering higher deposit interest rates. Matt Hougan, Bitwise’s chief investment officer, suggested that banks should respond to stablecoin competition by improving their own offerings rather than relying on regulatory restrictions.
Implications for the UK’s Digital Asset Market
FinOracleAI — Market View
The Bank of England’s proposal to cap stablecoin holdings introduces regulatory uncertainty that could dampen investor enthusiasm and innovation in the UK crypto market. The opposition from key industry players highlights the risk of stifling a nascent digital asset ecosystem, potentially disadvantaging the UK relative to more permissive jurisdictions. However, concerns about financial stability and currency substitution remain valid regulatory drivers.
Impact: Negative
