Bank of England Introduces Temporary Stablecoin Limits Without Defined End Date

Bank of England Introduces Temporary Stablecoin Limits Without Defined End Date

The Bank of England has announced it will implement “temporary” limits on stablecoin holdings to safeguard credit availability. However, Deputy Governor Sarah Breeden confirmed on Tuesday that there is no specified date for when these caps will be lifted.

The central bank intends to set limits ranging from £10,000 to £20,000 for individuals and up to £10 million for businesses using systemic stablecoins for payments. Breeden stated, “We would expect to remove the limits once we see that the transition no longer threatens the provision of finance to the real economy.” Unfortunately, the upcoming consultation paper, expected later this year, does not outline a timeline or criteria to determine when this condition will be satisfied.

This strategy differs significantly from the approach taken in the U.S., where Congress enacted the GENIUS Act in July to establish federal stablecoin regulations without ownership caps.

Tom Duff Gordon, Vice President of International Policy at Coinbase, previously expressed to the Financial Times that “Imposing caps on stablecoins is bad for UK savers, bad for the City, and bad for sterling,” highlighting that no other major jurisdiction has considered such caps necessary.

Deputy Governor Sarah Breeden | Source: WSJ

Understanding the Impact of Deposit Outflows on Credit

Breeden mentions that the Bank of England will permit accounts for systemic stablecoin issuers, allowing them to keep reserves at the central bank and earn returns by investing part of these reserves in short-term UK government bonds. The forthcoming consultation will suggest a potential liquidity facility to assist solvent issuers in monetizing assets during times of redemption pressure.

She clarified that this new role positions the Bank as a “banker to systemic issuers,” which will help avoid dependence on commercial banks for account management. This arrangement aims to reduce financial stability risks that arose during Circle’s USDC de-pegging in March 2023 following the failure of Silicon Valley Bank.

Earlier this month, Governor Andrew Bailey explained that quick outflows of deposits into stablecoins could lead to “a precipitous drop in credit for businesses and households” if banks are unable to rapidly secure wholesale financing from insurers and investment funds.

Varun Paul, former Head of the Fintech Hub at the Bank of England, mentioned in a discussion with Cryptonews that Bailey is “lifting the hood on the deep economic and policy questions” related to stablecoins for the first time. This includes evaluating whether a more distinct separation between payment systems and credit creation is sustainable. Paul also suggested that “a stablecoin could potentially have FSCS protection if its issuer contributes to the scheme.”

The Bank plans to increase the variety of settlement assets in its Digital Securities Sandbox to include regulated stablecoins. Currently, fifteen firms—including Euroclear, HSBC, J.P. Morgan, and the London Stock Exchange Group—are gearing up to establish trading venues as soon as next year.

Growing Industry Concerns

In line with Gordon's concerns, Simon Jennings, executive director of the UK Cryptoasset Business Council, argued that “limits simply don’t work in practice” because stablecoin issuers cannot effectively monitor token holders in real time. Implementing such caps would necessitate expensive solutions, like digital ID systems or continuous wallet management.

These limitations are heightening tensions between the Bank and the Treasury, especially after Chancellor Rachel Reeves committed in July to “drive forward developments in blockchain technology, including tokenized securities and stablecoins.”

The UK government has faced criticism regarding its regulatory approach. Recently, Reform UK leader Nigel Farage promised to reduce the crypto capital gains tax from 24% to 10% and establish a £5 billion Bitcoin reserve if elected, labeling the Bank’s stablecoin limits as “frankly ridiculous.” Reform UK is currently leading in multiple polling projections.

🇬🇧 Nigel Farage proposes UK Bitcoin reserve with £5B from seized assets and a crypto tax reduction from 24% to 10% as Reform becomes the first major party to accept crypto donations. #UK #Bitcoin
— Cryptonews.com (@cryptonews) October 13, 2025

Breeden acknowledged the challenges of coordination, mentioning the UK government will appoint a Digital Markets Champion to synchronize efforts within the private sector. Additionally, the government is introducing a digital gilt instrument on a Sandbox platform to encourage Distributed Ledger Technology (DLT) adoption.

It’s worth noting that the Bank’s new wholesale payments infrastructure, RT2, already supports settlement using tokenized central bank money. A synchronization feature is expected next year in the Synchronization Lab to test real-world applications before full deployment.

Despite these developments, the global stablecoin market has seen significant growth, surpassing $300 billion. In comparison, sterling-pegged tokens remain below $580,000, while euro-linked stablecoins are valued at around $473 million, according to DeFiLlama.

Market Overview
Source: DeFiLlama

Key Takeaways

The Bank of England is implementing temporary limits on stablecoin holdings without a specified end date.
Limits of £10,000-£20,000 for individuals and £10 million for businesses will be established.
The strategy contrasts with U.S. regulations, which don't enforce stablecoin ownership caps.
Concerns have arisen in the industry regarding the practicality and effectiveness of these limits.
The Bank is taking steps to position itself as a banker for systemic stablecoin issuers to ensure financial stability.