Bank of England Proposes Ownership Caps on Stablecoin Holdings

The Bank of England has taken a bold step in shaping the future of digital assets by proposing strict caps on stablecoin ownership. The draft rules, published this week, suggest that individuals would only be allowed to hold between £10,000 and £20,000 in systemically important stablecoins, while businesses could face limits of around £10 million. The central bank argues that such measures are necessary to mitigate risks to financial stability as digital currencies gain wider use.

Stablecoins, which are designed to maintain a one-to-one value with traditional currencies like the pound or dollar, have been increasingly adopted for payments, remittances, and as a bridge between the crypto world and mainstream finance. Regulators fear that if a widely used stablecoin were to collapse, it could trigger a chain reaction similar to a bank run, endangering not just investors but also the broader economy. The Bank of England said its goal is to prevent any one stablecoin from becoming too entrenched in the financial system without proper safeguards.

Industry players, however, have criticized the proposal as overly restrictive. Crypto advocacy groups argue that such limits would stifle innovation and discourage investment in the UK’s growing fintech ecosystem. Payment industry trade bodies have also voiced concern, saying that small and medium-sized businesses that rely on digital assets for international transactions could be disproportionately affected. They warn that the move could drive businesses to seek more favorable regulatory environments abroad, weakening the UK’s competitiveness in financial technology.

The debate comes as other global regulators grapple with similar questions. The European Union recently introduced the Markets in Crypto-Assets (MiCA) regulation, which provides a comprehensive framework for stablecoins and other digital tokens but stops short of imposing strict ownership caps. In the United States, lawmakers remain divided, with some pushing for tighter regulation and others advocating for stablecoin adoption as a way to modernize the payment system.

The Bank of England’s approach signals that the UK intends to take a cautious path, prioritizing systemic stability over rapid adoption. Officials say they want to encourage innovation but not at the expense of protecting consumers and ensuring that the financial system remains resilient. The central bank is also working on its own digital pound project, sometimes referred to as “Britcoin,” which could coexist with private stablecoins under a controlled regulatory regime.

A consultation period will allow stakeholders to provide feedback on the proposal before final rules are set. If implemented, the limits could take effect as early as 2026. For now, the proposal highlights the balancing act regulators face as they attempt to embrace digital finance while guarding against the risks of a fast-evolving sector.