What happened?
The Bank of England has proposed strict limits on the amount of stablecoin individuals and companies can own. This proposal has seen significant pushback from the cryptocurrency industry. The caps suggested would limit individuals to owning between £10,000 and £20,000 ($13,600 to $27,200) worth of stablecoin with businesses capped at £10m ($13.6m). This proposal is part of the central bank’s development of its regulatory framework for digital tokens that are linked to fiat currencies.
Who does this affect?
The new regulation, if implemented, would directly affect individual and corporate holders of stablecoins in the UK. Crypto industry representatives argue the move would stifle growth and put the UK behind other nations in terms of innovation and adoption of digital currencies. Additionally, the stablecoin issuers mentioned that enforcing these caps would be nearly impossible due to the inability to monitor who owns their tokens at any given time.
Why does this matter?
This move matters because it goes against the Treasury’s pro-digital innovation stance and threatens to amplify tensions between the Bank of England and the Treasury. Critics compare this approach to that of the US and EU, who have integrated stablecoins more effectively into their financial systems without ownership caps. Furthermore, the stablecoin market is poised for rapid growth, with forecasts indicating a potential increase to $1.2 trillion by 2028. The proposed regulations could hinder this growth and see business opportunities move overseas.