Bank of England proposes ownership limits in new stablecoin rules

The Bank of England has partly softened proposals for ownership restrictions on UK stablecoins as it pushes forwards with new rules for the cryptocurrency.

On Monday, the central bank said it is planning to temporarily impose caps on holdings of stablecoins, which are cryptocurrencies pegged directly to traditional assets such as real currency.

The plans indicate that individuals will be limited to owning up to £20,000 in UK stablecoins that are considered systemically important.

It said most businesses would have a limit of up to £10 million.

The Bank of England has been assessing the potential opportunities and risks linked to digital currencies over the past year.

Last month, Governor Andrew Bailey said the UK should “reap the benefits” of stablecoins as part of the country’s financial system and said it would be “wrong” to be against them as a matter of principle.

In a new consultation document, the Bank said it is “preparing for a future where new forms of digital money may be widely used for payments alongside existing ones, offering valuable choice for the public”.

It said its proposed limits would include allowing stablecoin issuers to have as much as 60% of the backing assets in short-term government debt.

The Bank said it is also considering central bank liquidity arrangements to “support systemic stablecoin issuers in times of stress”.

Sarah Breeden, deputy governor for Financial Stability at the Bank, said: “Our objective remains to support innovation and build trust in this emerging form of money.

“We’ve listened carefully to feedback and amended our proposals for achieving this, including on how stablecoin issuers interact with the Bank of England.

“These proposals are fit for a future where stablecoins play a meaningful role in payments, giving the industry the clarity it needs to plan with confidence.”