BoE Proposes Stablecoin Caps, Sparking Crypto Backlash
Bank of England has proposed strict stablecoin caps to limit systemic risks from large crypto deposits. Under the plan, individuals could hold £10,000–£20,000 in regulated stablecoins, while businesses face a £10 million limit. This measure aims to prevent sudden bank deposit withdrawals and safeguard financial stability amid a global stablecoin market valued at over $300 billion.
Crypto firms including Coinbase and the UK Cryptoasset Business Council warn that these stablecoin caps could stifle innovation and harm savers. They highlight implementation challenges, such as real-time wallet tracking, and warn of driving stablecoin activity offshore. Critics also fear the UK will fall behind the US and EU in crypto regulation, undermining London’s fintech leadership.
Regulators, including the FCA, defend the caps as a necessary temporary guardrail against systemic threats and mass fund migrations. Traders should monitor stablecoin caps closely, as they could affect market liquidity, trading volumes, and the long-term adoption of crypto payments in the UK.
Bearish
The proposed stablecoin caps are likely to be bearish for the UK crypto market. In the short term, caps on individual and business holdings will reduce market liquidity and trading volumes for regulated stablecoins, as traders adjust positions to comply with new limits. Implementation challenges, such as real-time wallet tracking, may incur additional costs and complexity for exchanges.
Over the long term, restrictive stablecoin regulation could stifle innovation and drive stablecoin activity offshore, weakening London’s position as a crypto hub. Reduced access to on-chain liquidity may also dampen decentralized finance growth in the UK. Although regulators frame the caps as a necessary guardrail for financial stability, the net effect on market sentiment and adoption is likely negative.