Bank of England Deputy Governor Sarah Breeden clarified that the central bank’s plan to restrict StableCoin holdings and transaction size will only be a temporary measure to ensure stability in the financial system.
The proposed limits on StableCoins was first floated in a discussion in November 2023 Paper as a means to ensure financial stability. While plans last, Industry groups issued a statement in Septemberarguing that it will prevent innovation and limit growth.
However, in a speech at DC Fintech Week on Wednesday, Breeden said The limits were only intended as a temporary stop, which will be removed because the bank ultimately wants to “support a role for StableCoins as part of a multi-money system.”
Breeden said the measures would allow “the structure of real-economy financing to adjust” to StableCoins and ensure that the bank can “monitor the adoption of stablecoins and assess the potential for rapid changes in the structure of the financial system.”
“So let me be clear. We expect to remove the limits as soon as we see that the transition no longer threatens the financial provision of the real economy.”
Broad industry group criticized the proposed limitspreviously floating between $13,429 and $26,858 (10,000 and 20,000 British pounds), arguing that this would also signal to the wider industry that the UK is not a crypto-friendly jurisdiction and drive businesses away.
The rules of StableCoin are not yet set in stone
Breeden said the BOE is launching a consultation before the end of the year, asking for feedback on cap levels and a path for implementation.
“We will be consulting in the coming weeks on the detail of our proposed regime for Sterling StableCoins used in systemic payment systems, and we will be open to feedback as we finalize our rules,” he said.
One proposal being floated is a higher limit for businesses and an exemption for supermarkets and other large companies.
A carveout for companies Operating in the country’s digital sandboxlaunched in October 2024 as an area test for Digital Ledger Technologyis also discussed.
The bank concern system cannot maintain StableCoins
The main concern of the BOE, according to Breeden, is that the rapid flow from banks to StableCoins could lead to a “tremendous collapse in credit for businesses and households,” if the system cannot be maintained, and increased, in scale and at speed.
The focus, he said, is making sure the financial system has time to gradually adjust, which is a “critically important issue in the UK given that credit here is more dependent on the banks compared to, say, the position in the US.”
“Our starting point is that applying limits to a user’s holdings of a given stableCoin system is the best way to avoid a massive reduction in credit availability to UK lenders.”
The Central Bank wants to remain only as a settlement for the asset markets
At the same time, Breeden said his view is that wholesale payments and settlement in asset markets remain the domain of the central bank to avoid “unnecessary entanglements in the financial system,” and possible risks to stability.
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However, he also pointed out that the money supported by the central bank is not currently used for all the repairs anyway and predicted that it will not be in the future, as it is likely to play a role in Tokenized markets for tokenized deposits and regulated stablecoins.
“However, we can’t do this alone. We need the industry – both incumbents and new entrants – to work with us to engage, to experiment, to develop use cases, and to roll out this technology,” added Breeden.
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