UK cryptocurrency industry advocacy groups are calling on the Bank of England not to proceed with plans to limit individual stablecoin holdings.

In a discussion paper released in November 2023, the Bank of England proposed setting a cap on personal digital pound holdings between £10,000 ($13,558) and £20,000, and sought feedback on a possible £5,000 minimum.

According to a report by the Financial Times on Monday, industry groups criticized the plan, stating that its implementation would be difficult and costly, potentially causing the UK to fall behind other jurisdictions.

Reportedly, Tom Duff Gordon, Vice President of International Policy at Coinbase, stated that these restrictions would be detrimental to UK savers and the pound itself. He said, "No other major jurisdiction sees the need to implement a cap."

Simon Jennings, Executive Director of the UK Cryptoassets Business Council (UKCBC), told the Financial Times, "The limits simply won't work in practice."

He added, "Issuers cannot know at all times who holds their tokens, so enforcing a cap would require a costly and complex new system."

Last week, Jennings told Cointelegraph that the UKCBC aims to "establish a transatlantic corridor for stablecoin payments" between the UK and the US. The Bank of England's plans would limit the effectiveness of such systems.

UK regulators are concerned that stablecoins could undermine the stability of the traditional financial ecosystem. In early April, the UK's Financial Policy Committee acknowledged the significant expansion of the stablecoin and cryptocurrency markets over the past year, which has drawn considerable regulatory attention.

The committee noted at the time, "Even with appropriate regulation, greater use of foreign currency-denominated stablecoins could make some economies vulnerable to currency substitution." Other countries have raised similar concerns.

Earlier this month, European Central Bank (ECB) President Christine Lagarde called on policymakers to address regulatory gaps regarding stablecoins. Among other remarks, she warned that US stablecoin policies "could not only lead to further costs and data losses but could also result in euro deposits moving to the US, further strengthening the dollar's role in cross-border payments."

Banks are also concerned that if stablecoins are allowed to pay interest to holders, they may struggle to compete with the convenience of stablecoins. Citi's Head of Future Finance, Ronit Ghose, warned in late August that paying interest on stablecoin deposits could trigger a wave of bank fund outflows similar to the money market fund boom of the 1980s.

Some in the cryptocurrency industry suggest that banks should enhance their competitiveness. Bitwise's Chief Investment Officer, Matt Hougan, recently stated, "If local banks are worried about competition from stablecoins, they should pay more interest on deposits."

Former UK Chancellor and current cryptocurrency lobbyist George Osborne recently stated that the UK is falling behind in the digital asset market, particularly in the stablecoin sector.

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Original article: “UK Crypto Groups Oppose Bank of England Stablecoin Cap”

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