In recent weeks, the Bank of England has stirred controversy by floating proposals to limit how much stablecoin British citizens and companies may hold. The move has sparked strong objections from major crypto firms and industry groups—who warn that such caps could stifle innovation, complicate compliance, and drive business abroad. What began as a regulatory precaution now looks like a potential battleground in the UK’s broader fight for crypto relevance.
Officials at the Bank of England are reportedly considering ownership caps in the range of £10,000 to £20,000 for individuals, and as high as £10 million for businesses, but only for “systemic stablecoins”—those deemed widely used or likely to become a backbone of payments in the UK. The idea is to prevent large outflows of capital from traditional bank deposits, which regulators fear might weaken banks’ capacity to lend when stablecoins gain mass adoption.
Behind the scenes, the concern is this: if too much money shifts into crypto-based stablecoins, deposits in banks could shrink rapidly in times of stress, impairing the banking system’s stability. Hence, the ownership caps are pitched as a safeguard—a way to slow a wholesale migration of funds into digital assets, at least until regulators can catch up.
Still, the Bank has characterized the caps as possibly “transitional” while the financial system adapts to digital money. It argues that the limits would serve as one layer of prudential guardrails amid a broader stablecoin regime.
The crypto sector’s response has been swift and harsh. Executives and trade bodies caution that these caps are not just draconian—they may also be unworkable in practice.
Critics point out that stablecoin issuers typically do not track who ultimately holds their tokens at any given moment. Unlike banks, stablecoin systems are permissionless and pseudonymous. Enforcing precise caps per user would require a sweeping new infrastructure—digital identities tied to wallets, real-time monitoring, and probably heavy coordination between exchanges and wallet providers. Many in the industry see that as an administrative and technological burden that could outweigh benefits.
Some argue the proposal is inconsistent with how other jurisdictions are approaching stablecoin regulation. In the U.S., for example, new laws are focusing on reserves, disclosures, and issuer conduct—not quantitative limits on holdings. The European Union’s MiCA (Markets in Crypto-Assets) framework likewise avoids caps, favoring rules around transparency, risk mitigation, and governance.
Moreover, proponents warn that the UK could lose its competitive edge. Exchanges, fintech firms, and crypto startups may gravitate toward markets with lighter restrictions. With London historically a global financial center, many in the crypto world fear that stifling rules will drive capital and talent to more welcoming jurisdictions.
Tom Duff Gordon, a policy executive at Coinbase, put it bluntly: caps on stablecoins are “bad for UK savers, bad for the City, and bad for sterling.” Others have questioned why stablecoins should be singled out when there are no equivalent caps on cash holdings or bank deposits.
This debate is not happening in a vacuum. The UK has been actively trying to define its stance on crypto, juggling financial stability, consumer protection, and innovation.
On one hand, the Bank of England has long warned that stablecoins could threaten the banking system by permanently drawing away deposits. The governor and other officials have expressed a preference for “tokenized deposits”—digital versions of traditional bank money—as more aligned with regulated finance. In some recent speeches, central bank leaders have suggested that stablecoins should be regulated similarly to banks or deposit-taking institutions, with access to central bank facilities and depositor protections.
On the other hand, the Treasury and parts of the government have emphasized the economic potential of blockchain, fintech, and digital assets. The chancellor has voiced support for tokenization and stablecoins as part of a modernized financial ecosystem. In fact, tensions between regulatory caution and innovation policy are increasingly visible in the UK’s approach to crypto.
At the heart of the controversy is timing. Many industry actors say the BoE is rushing to impose one-size-fits-all limits before finishing key rulemaking and giving the market a chance to adapt. Because stablecoin markets move fast, transitional rules—even temporary ones—can have outsized effects on infrastructure decisions, hiring, and capital allocation in the crypto sector.
Beyond principle, there are thorny practical issues in making such caps workable:
- Enforcement complexity: Assigning real-world identities to every digital wallet, continuously monitoring balances, and coordinating that data across exchanges, wallets, and custodians would create compliance costs and privacy risks.
- Fragmented market: Many stablecoins are issued offshore or by non-UK entities. It’s unclear how the BoE would compel foreign issuers to enforce UK caps or prevent holders from accessing foreign stablecoins instead.
- Market distortion: Setting caps could push users toward smaller, “non-systemic” stablecoins that aren’t subject to regulation, or drive demand into loosely regulated tokens, undermining regulatory objectives.
- Innovation chill: Startups building new payment rails, layer-2 applications, or DeFi utilities may reconsider operations in the UK if their ability to scale is constrained artificially. Funding flows might reroute to more permissive jurisdictions.
- Transitional ambiguity: If caps are meant to be temporary, ambiguity around their sunset or evolution may deter investment and lead to legal risk.
Given these challenges, many in the crypto industry see the policy as premature or heavy-handed. They fear it will lock in frameworks before the technology and markets have matured.
The BoE plans to publish a formal consultation later this year, seeking feedback and fleshing out details on stablecoin regulation. That will be a critical moment: the industry hopes to influence thresholds, carve-outs, and implementation timelines.
Some in crypto circles believe a compromise is possible—measures like gradual phase-ins, exemptions for certain use cases, or caps based on net stablecoin exposure rather than gross holdings. They’re also pushing for a more gradual, incentives-based approach rather than rigid limits.
In parallel, banks in the UK are already exploring tokenization of deposits—essentially creating blockchain versions of traditional bank assets. If that model gains traction, it may be seen as a more integrated, regulated alternative to stablecoins, consistent with regulatory direction.
The stakes are high. The stablecoin market now spans hundreds of billions in value globally. While the UK has yet to see a major sterling-based stablecoin emerge, global momentum in digital dollars, euros, and algorithmic alternatives could eclipse British innovation if regulations lag.
If the Bank of England tightens holding caps too restrictively or prematurely, it risks sending a chilling signal. Crypto firms may relocate or de-emphasize UK operations, depriving local markets of jobs, investment, and infrastructure. Conversely, a better-balanced approach could preserve stability while allowing the UK to remain a leader in digital finance.
The Bank of England’s proposed stablecoin ownership caps represent one of the boldest regulatory moves yet into the heart of crypto markets. While the intent—to safeguard the banking system from mass deposit shifts—carries weight, the execution risks clashing with the decentralized, permissionless nature of crypto.
Industry resistance is not just rhetorical: it voices deep concerns over enforceability, international competitiveness, and the long-term direction of UK fintech. The coming consultation will be a litmus test of whether regulators and crypto innovators can find common ground—or whether the UK will emerge from this conflict as a relative backwater in the fast-moving world of digital finance.