tGBP Featured in Bloomberg

BOE Open to Changing Stablecoin Caps After Industry Backlash

Bank of England Deputy Governor Sarah Breeden hinted that UK regulators may soften their relatively strict approach to limits on stablecoin holdings which sparked a backlash from the digital asset industry.

The central bank is “genuinely open to other ways of achieving the objective” of protecting the UK economy against the “very real risk” of a sudden shift caused by customers moving their deposits from banks to stablecoins, Breeden said on Wednesday.

“We proposed holding limits as a way of managing that risk,” she told the House of Lords Financial Services Regulation Committee. “We are open to feedback on other ways of achieving it.”

To prevent an abrupt deposit flight from banks, the BOE in November proposed that stablecoins it deems systemically-important should face temporary holding limits of £20,000 for individuals and £10 million for businesses. But stablecoin issuers and the wider crypto industry have warned that the caps may be difficult to enforce and risk stifling innovation.

Stablecoins — cryptocurrencies typically pegged to traditional assets such as the US dollar — have surged in popularity over the past year, as more financial institutions view them as a way to make payments faster and potentially cheaper.

In particular, activity among banks and major payments companies has accelerated in recent months following the passage of the Genius Act in the US, a new regulatory framework for stablecoins championed by President Donald Trump. The European Union implemented stablecoin rules in mid-2024 through its digital asset regime.

Against that backdrop, stablecoin proponents say the UK risks ceding ground to faster-moving jurisdictions.

Breeden said the caps are “there to support an orderly transition as the shape of the system changes” with the BOE set to update on its draft stablecoin regulations in June. Lending to households and businesses in the UK is still heavily reliant on banks who often fund this through customer deposits. In the US, financial markets are a more important source of lending, a difference that would make the UK economy more exposed to a shift from bank deposits to stablecoins, Breeden said.

While the caps will be temporary and have some carve-outs such as for large retailers, early issuers have warned that the limits may be impossible to implement practically. The draft rules would also force issuers to hold at least 40% of the backing assets in unremunerated deposits at the central bank, another source of concern.

“There’s really a small window to get things right,” said Benoit Marzouk, chief executive officer of Tokenised GBP, which issued one of the few pound stablecoins currently available. “It could be really damaging for the UK, if we had this limit for both retail and companies. As a business, you can’t do anything with £10 million.”

Implementing the caps may prove difficult in practice, as it remains unclear how issuers would effectively track who ultimately holds their tokens — and in what amounts — once they start trading on secondary markets.

“Having that transferability in the secondary market is part of the benefit of stablecoins and makes them globally accessible, but it means tracking who’s holding what is not necessarily even possible, and it would be a massive administrative burden,” said Tom Rhodes, chief legal officer at Agant, a company with plans to issue a pound-denominated stablecoin.

While Breeden defended the UK central bank’s proposed rules for stablecoins and said the industry pressure is “very real,” she acknowledged technical difficulties with imposing the caps.

“We’ll have to build something for a limit that is intended to be temporary, and how do the costs and benefits of that stack up?” she said. “I don’t think we’ve had yet the constructive engagement on a different way to solve the problem that I might have hoped for.”

The BOE is currently reviewing feedback to its November consultation paper that proposed the new rules. It plans to have the final regulations in place by the end of the year as it looks to keep pace with regulators globally.