UK Proposes Stablecoin Holding Caps, Sparks Industry Backlash
The Bank of England's proposal to cap individual holdings of stablecoins has sparked a strong negative reaction from the crypto industry. Coinbase's CEO criticized the approach as anti-competitive and a form of picking winners. The regulatory move highlights ongoing policy uncertainty for stablecoins, which are critical for capital flows in DeFi.
- The proposed caps are £20,000 for individual consumers and £10 million for corporate bodies, a measure the Bank of England suggests could be "transitional" to prevent large, rapid outflows from traditional bank deposits. - Regulators are concerned that without limits, a sudden shift of funds into stablecoins could disrupt the banking system's ability to provide credit to the wider economy. - The rules specifically target "systemic" sterling-denominated stablecoins used for payments, while stablecoins used primarily for crypto trading will fall under the supervision of the Financial Conduct Authority (FCA). - This proposal is part of a broader regulatory framework established by the Financial Services and Markets Act 2023, which brought stablecoins used for payments under the UK's regulatory authority. - In addition to holding caps, the proposal requires stablecoin issuers to back their coins with a mix of assets, including unremunerated deposits at the Bank of England and short-term UK government debt. - Critics, including the UK Cryptoasset Business Council, argue the holding limits are impractical to enforce as issuers often do not have visibility into the ultimate holders of their tokens. - The UK's approach is notably different from other major jurisdictions like the European Union and the United States, which have not included similar individual holding caps in their stablecoin regulations. - This regulatory push is occurring alongside the Bank of England and HM Treasury's ongoing exploration of a central bank digital currency (CBDC), referred to as the "digital pound."
