UK Crypto Groups Oppose Bank of England’s Stablecoin Ownership Cap

Crypto industry groups in the UK have pushed back against the Bank of England’s (BOE) proposal to restrict stablecoin ownership, warning that the move could hurt competitiveness and be costly to implement.

BOE’s Proposed Limits

• Individuals: Ownership cap of £10,000–£20,000
• Businesses: Cap of £10 million
• Justification: To safeguard the banking system from risks posed by unregulated cryptocurrencies.

What Are Stablecoins?

• A type of cryptocurrency designed to maintain stable value relative to an asset.
• Typically pegged to:
  • Fiat currency (e.g., US dollar)
  • Commodities (gold, silver, oil)
  • Other cryptocurrencies
• Algorithmic stablecoins: Managed by computerised algorithms, sometimes with asset backing.
• Most popular example: Tether (USDT), widely traded for other cryptocurrencies.

Uses and Risks

• Used by investors to park profits without converting into real money.
• Facilitate cheap, fast transactions without intermediaries, with ownership recorded on digital ledgers.
• Risks:
  • Potential financial instability
  • “Run” risk similar to bank runs, if large numbers withdraw holdings simultaneously.

(Source: IE)