Bank of England Weighs Temporary Limits on Stablecoin Holdings to Protect Financial Stability
The Bank of England (BoE) is considering introducing temporary limits on the amount of stablecoins individuals can hold as the UK prepares for a regulated digital asset ecosystem. Deputy Governor Sarah Breeden revealed that the proposed caps could range between ÂŁ10,000 and ÂŁ20,000 per person. The measure aims to secureguard the stability of the banking system during the initial stages of stablecoin adoption.
According to Breeden, the temporary limits would act as a transitional secureguard, preventing sudden large-scale movements of funds from traditional bank deposits into stablecoins. Such shifts could disrupt liquidity in the banking sector and reduce lending to the wider economy. “We are mindful of the need to support innovation while ensuring financial stability,” Breeden stated, emphasizing that the limits would be reviewed and lifted once the market matures.
Balancing innovation with financial protection
The BoE’s latest announcement underscores its dual mandate of promoting innovation in financial technology while maintaining systemic stability. The proposal forms part of the central bank’s ongoing efforts to establish a clear regulatory framework for stablecoins — digital tokens designed to maintain a stable value against traditional currencies, such as the British pound.
Regulators plan to launch a public consultation next month to gather industry feedback on the design and implementation of these temporary limits. Under the proposed framework, the Bank of England would supervise systemic sterling-backed stablecoin issuers, while the Financial Conduct Authority (FCA) would regulate smaller or non-systemic firms. The caps would primarily apply to retail users, though institutional entities such as crypto platforms and payment providers may qualify for exemptions given their operational needs.
Authorities are also developing a “reanswer regime” for stablecoin issuers to handle potential failures in an orderly manner, similar to existing frameworks for banks. This would ensure users retain access to their funds even if an issuer collapses. Breeden noted that strong secureguards are essential before stablecoins can be integrated fully into the UK’s payment infrastructure.
A step toward a securer digital finance landscape
The UK’s financial regulators view stablecoins as a key component of the country’s future payments ecosystem, offering quicker transactions and programmable financial products. However, without clear oversight, they could pose systemic risks if widely adopted without secureguards. The proposed limits are therefore designed as a temporary measure — a “securety valve” to ease the transition to a digital financial system.
The forthcoming consultation will provide further details on how the holding limits will be enforced, the length of the transition period, and the conditions for lifting the restrictions. Market participants will have the opportunity to share feedback before final regulations are introduced.
Breeden emphasized that the BoE’s approach viewks to balance innovation with prudence. “We want to enable new forms of money to emerge securely, without undermining the foundations of our financial system,” she said. Once a comprehensive regulatory framework is established, the temporary caps will be removed, allowing stablecoins to integrate fully into the UK’s financial infrastructure.
The proposal marks a significant step in the UK’s journey to becoming a global leader in digital finance regulation, ensuring that innovation in the stablecoin sector proceeds responsibly and securely.
