Bank of England Clarifies Stablecoin Limits Are Only Temporary

• The Bank of England confirmed stablecoin holding limits will only be temporary measures.
• Sarah Breeden said the limits will ease once stablecoins no longer threaten credit flows.
• The BOE will launch a public consultation to refine and finalize its stablecoin framework.

The Bank of England (BOE) has moved to calm industry concerns over its proposed limits on stablecoin holdings and transactions. Deputy Governor Sarah Breeden said the restrictions are temporary and aimed at ensuring financial stability during the early stages of adoption.

Breeden made the clarification in a speech at DC Fintech Week, in response to growing criticism from fintech and crypto groups. She clarified that the restrictions are intended to give the financial system time to adjust, not to discourage innovation.

Temporary Limits to Manage Transition

The proposed rules were first outlined in a discussion paper released in November 2023. The Bank of England suggested placing caps on stablecoin holdings to prevent disruptions to credit supply in the economy. Industry groups strongly opposed the idea in September, warning that the limits would make the U.K. appear unfriendly to crypto innovation. Critics also argued the plan would drive away businesses seeking a supportive regulatory environment.

Breeden acknowledged these concerns and said the restrictions are a “temporary stopgap.” The central bank will remove them once it determines that stablecoin adoption no longer threatens credit availability.

“So let me be clear,” she said. “We would expect to remove the limits once we see that the transition no longer threatens the provision of finance to the real economy.”

The limits under consideration are between £10,000 and £20,000 ($13,429–$26,858). Regulators are also studying whether businesses should have higher caps or exemptions.

According to Breeden, the measure will give the financial system time to adapt to new digital forms of money. It will also allow regulators to monitor the pace of adoption and assess its effects on banks and lending.

Consultation and Broader Digital Plans

The Bank of England will launch a public consultation before the end of the year. The process will gather feedback on the suggested limitations, implementation schedule and potential exemptions.

“We will be consulting in coming weeks on the detail of our proposed regime for sterling stablecoins used in systemic payment systems,” Breeden said. “We’ll be open to feedback as we finalize our rules.”

The consultation will explore a higher threshold for large companies, including supermarkets, and special provisions for firms operating in the U.K.’s digital sandbox. The sandbox, launched in October 2024, allows companies to test blockchain-based products under regulatory oversight.

Breeden explained that the central bank’s main concern is avoiding rapid outflows of deposits from commercial banks into stablecoins. She said this could lead to a sudden drop in credit for businesses and households.

The deputy governor added that the U.K. relies more heavily on bank lending than other countries. Because of this, regulators need to ensure the transition to digital money does not disrupt the real economy.

“Our starting point is that applying limits to a user’s holdings of a given systemic stablecoin is the best way to avoid such a precipitous reduction in the availability of credit,” she said.

Related: RBI Governor Malhotra Pushes CBDCs for Cross-Border Payments

Balancing Stability and Innovation

Breeden also discussed the future of payments and settlements in tokenized markets. She said the central bank should remain the main settlement provider for wholesale and asset markets. This would help avoid excessive interconnections and stability risks in the financial system.

However, she acknowledged that central bank money will not dominate all settlements. Regulated stablecoins and tokenized deposits will likely play key roles in tokenized finance.

“We can’t, though, do this alone,” Breeden said. “We need the industry — both incumbents and new entrants — to work with us, to engage, to experiment, and to develop the use cases.”

Her remarks indicate that the U.K. remains committed to creating a balanced framework for stablecoins, one that protects the financial system while supporting innovation.