Bank of England Promises ‘Temporary’ Stablecoin Caps – But Sets No End Date

Core Viewpoint - The Bank of England is implementing temporary limits on stablecoin holdings to safeguard credit availability, with specific caps for individuals and businesses, but has not provided a timeline for lifting these limits [1][2]. Group 1: Regulatory Measures - The Bank of England plans to impose limits of £10,000-£20,000 for individuals and £10 million for businesses on systemic stablecoins used for payments [1]. - The approach taken by the Bank of England contrasts with the U.S., where federal stablecoin regulation has been established without ownership caps [2]. - A consultation paper will outline a potential liquidity facility to assist solvent issuers in monetizing assets during redemption pressure [3]. Group 2: Financial Stability Concerns - Rapid deposit outflows into stablecoins could lead to a significant reduction in credit availability for businesses and households if banks cannot quickly scale wholesale financing [4]. - The Bank of England aims to act as a "banker to systemic issuers," allowing them to hold reserves at the central bank and invest in short-term UK government debt, thereby reducing reliance on commercial banks [3]. Group 3: Economic and Policy Implications - The discussion around stablecoins is opening up deeper economic and policy questions, including the sustainability of separating payments from credit creation [5]. - There is potential for regulatory features to be applied to non-bank stablecoin issuers, such as providing FSCS protection if the issuer contributes to the scheme [5].