LONDON :The Bank of England will only remove proposed caps on the quantity of stablecoins individuals and businesses can hold when it is confident they do not pose a threat to financial stability.
The central bank has taken a tougher stance than many authorities on embracing stablecoins, a type of cryptoasset pegged to fiat currency that has soared in popularity.
The crypto industry has opposed the planned caps, but BoE Deputy Governor Sarah Breeden reiterated on Wednesday they were needed because of the potential impact of significant and rapid outflows of bank deposits into stablecoins.
Such outflows, she said in a speech, could lead to a “precipitous drop in credit for businesses and households if the banking system were unable to increase, at scale and at pace, its use of wholesale financing from non-banks”.
The BoE has previously indicated it could apply limits of 10,000 pounds to 20,000 pounds ($26,778) for individuals, and higher levels for businesses, marking it out from other major countries which do not have limits.
It is due to publish a consultation setting out updated proposals for a future regulatory regime next month. This will seek views on proposed levels for stablecoin limits.
Breeden said the BoE would expect to remove the limits “once we see that the transition no longer threatens the provision of finance to the real economy”.
The largest businesses would likely be exempted from the cap so that they could hold more if required, Breeden said.
Under Britain’s proposed regulatory framework, the BoE would only regulate systemic sterling stablecoins, or those deemed capable of becoming widely used for payments, while the Financial Conduct Authority, which has proposed a less stringent regime, would regulate the remainder.
The BoE is also working with the Treasury to introduce a resolution regime for stablecoins, so that where an issuer fails, there is continuity of services for coinholders.
Breeden rejected suggestions that Britain has been slow to regulate cryptocurrencies, saying it expects to finalise its regulatory framework next year, in line with U.S. targets.
($1 = 0.7469 pounds)
