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The Bank of England (BoE) is already revising its proposed rules regarding stablecoin holdings, suggesting that it may offer exemptions to the proposed caps on the number of stablecoins individuals and businesses can hold.
In September, the Bank of England confirmed it planned to restrict ownership of stablecoins. Under the proposals, individuals would be limited to somewhere between £10,000 ($13,310) and £20,000 ($26,618) worth of stablecoins. For businesses, the limit would be £10,000,000 ($13,309,376).
However, on October 6, Bloomberg reported that the Bank of England was planning exemptions for certain businesses that had legitimate requirements to hold large amounts of stablecoins, such as exchanges.
The personal limits are apparently going ahead unchanged, although comments by senior Bank of England figures suggest that a consultation paper on the U.K.’s stablecoin regime is coming in the next few months.
If implemented, the rules would be unique in global digital asset rulemaking and far stricter. Neither the U.S.’ slate of stablecoin legislation nor the EU’s Markets in Crypto-Assets Regulation (MiCAR) legislation imposes limits on how many stablecoins individuals and businesses are permitted to own.
What appears to be driving the BoE’s concerns about the unknown effects stablecoin adoption will have on traditional market structures. Specifically, the BoE is anxious not to unintentionally weaken the link between credit creation—typically performed by banks—and money.
“It is possible, at least partially, to separate money from credit provision, with banks and stablecoins coexisting and non-banks carrying out more of the credit provision role,” wrote BoE Governor Andrew Bailey in the FT last week.
“But it is important to consider the implications of such a change thoroughly before going ahead. Only then can we formulate a regime that both supports this coexistence throughout the economic cycle and carefully manages the transition to a future financial system.”
This was further echoed in a speech given by Executive Director Sasha Mills at a conference in Amsterdam:
“In the meantime, applying holding limits to stablecoins could allow us to learn more about the potential impact on the cost and availability of credit, and mitigate the risk of a disorderly transition.”
Predictably, the proposals received backlash from within and outside the digital asset industry, which is unlikely to have been dampened by this week’s walkback.
Ben Lee, Crypto Tax Partner at tax services firm Andersen, published an open letter which appeared in the Financial Times, calling the caps a “blunt instrument that will choke off digital innovation in UK financial services.”
“Far from safeguarding consumers, the regulation would simply insulate banks from competition and send an unmistakeable message: Britain is closed for digital asset business.”
Watch | Cut Costs & Streamline Payments: The Case for Stablecoins
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