LONDON, Oct 15 (Reuters) – The Bank of England will only remove proposed caps on the amount of stablecoins individuals and businesses can hold when it is satisfied they do not pose a threat to financial stability.
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The crypto industry has opposed the planned caps, but BoE Deputy Governor Sarah Breeden reiterated on Wednesday that they were necessary due to the potential impact of large and rapid outflows of bank deposits into stablecoins.
Such capital outflows, she said in a speech, could lead to “a sharp fall in credit to businesses and households if the banking system was not able to increase, on a large scale and at a sustained pace, its reliance on wholesale financing from non-banks.”
The BoE has previously indicated it could apply limits of 10,000 to 20,000 pounds ($26,778) for individuals, and higher levels for businesses, differentiating it from other major countries which have no limits.
It is expected to publish a consultation next month setting out updated proposals for a future regulatory regime. This will gather feedback 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 financing to the real economy”.
Larger companies would likely be exempt from the cap so they could hold more if needed, Breeden said.
Under Britain’s proposed regulatory framework, the BoE would only regulate systemic sterling stablecoins, or those deemed capable of being widely used for payments, while the Financial Conduct Authority, which has proposed a less strict regime, would regulate the rest.
The BoE is also working with the Treasury to introduce a resolution regime for stablecoins, so that in the event of an issuer failure, there is continuity of services for coin holders.
Breeden dismissed suggestions that Britain had been slow to regulate cryptocurrencies, saying it planned to finalize its regulatory framework next year, in line with US targets.
($1 = 0.7469 pounds)
Reporting by Phoebe Seers; Editing by Tommy Reggiori Wilkes and Alexander Smith
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