Bank of England: Temporary limits on stablecoins explained!

Bank of England: Temporary limits on stablecoins explained!

On October 15, Sarah Breeden, the deputy governor of the Bank of England, commented on the planned restrictions on stablecoins during DC Fintech Week. She stressed that these limits are intended as temporary measures to mitigate outflows from the banking sector. Breeden explained that the holding limits are intended to allow individuals to hold between £10,000 and £20,000 and companies to hold up to £10 million in systemic stablecoins. These proposals were first unveiled at the end of November and aim to minimize financial stability risks that could arise from large and rapid outflows of deposits.

Continuing concerns about the impact of these restrictions led to intense discussion within the financial industry. Critics have raised concerns that the limits could seriously jeopardize the UK's ambitions to become a global hub for digital assets. However, Breeden made it clear that the restrictions are only a temporary measure. She believes the Bank of England wants to support the use of stablecoins for “retail and wholesale payments” when financial conditions allow.

Planning and future developments

The Bank of England plans to launch a consultation to refine the rules by the end of 2025. Breeden expects that the limits can be removed once the transition period no longer threatens the provision of financing to the real economy. The bank is working on a future-proof regulatory concept to effectively regulate the dynamic stablecoin market. This presents a challenge as the industry is constantly changing and new developments can impact the regulatory environment.

Another point highlighted is Bank of England Governor Andrew Bailey's skepticism towards cryptocurrencies. He warns that inadequately regulated stablecoins could threaten the fundamental nature of money. This view highlights the need for a carefully developed and implemented regulatory framework to avoid potential risks.

Overall, it is clear that the Bank of England's measures are seeking a balance between the necessary regulation and the promotion of innovation in the digital financial sector. Breeden and her team are open to feedback from the industry to develop the right measures and ensure the stability of the financial system.

Stablecoin developments therefore remain a crucial issue for both financial players and regulators in the UK.

For more information on these topics, see the articles from Crypto News.