Bank of England Proposes Strict Stablecoin Ownership Caps Limiting Retail Access ∞ Regulation

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Briefing

The Bank of England has proposed stringent ownership limits on ‘systemic’ stablecoins, introducing a new layer of quantitative risk control that fundamentally shifts compliance from the issuer to the user-account level. This action, driven by a mandate to preserve financial stability, requires Crypto Asset Service Providers (CASPs) to architect complex new systems for monitoring and enforcing user-specific aggregate holdings. The proposal suggests an individual holding cap between £10,000 and £20,000 , a standard significantly below current institutional market requirements.

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Context

The existing UK framework for digital assets has focused primarily on bringing exchanges and promotions under the regulatory perimeter, with the government aiming to establish the country as a global crypto hub. Prior to this proposal, stablecoin regulation centered on reserve requirements and custody standards, similar to the EU’s MiCA, but without direct limits on user exposure. The prevailing uncertainty was how the Bank of England would address the systemic risk of widely adopted payment stablecoins without stifling innovation, a challenge now addressed through direct quantitative control.

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Analysis

This proposal creates a critical operational challenge for UK-facing CASPs, forcing an immediate update to their core compliance frameworks. Entities must develop real-time, cross-platform surveillance capabilities to track a client’s aggregate stablecoin exposure against the mandated threshold, going beyond standard Anti-Money Laundering (AML) checks. The restriction on retail and business access will inevitably suppress the total addressable market for pound-pegged stablecoins, directly impacting product structuring and liquidity provision within the UK jurisdiction. This move sets a precedent of regulating the user rather than solely the issuer , a significant divergence from the US and EU approaches.

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Parameters

Individual Stablecoin Cap ∞ £10,000 to £20,000 ∞ The proposed maximum holding limit for retail users of systemic stablecoins.
Business Stablecoin Cap ∞ ~£10 million ∞ The proposed maximum holding limit for institutional or business users of systemic stablecoins.
Jurisdiction ∞ United Kingdom ∞ The market where the Bank of England’s prudential rules will apply.

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Outlook

The proposal is currently in a consultation phase, and the industry is expected to mount significant pushback, arguing the caps are unworkable and anti-innovative. The final rule will determine whether the UK prioritizes financial stability through strict quantitative limits or market growth through less restrictive issuer-focused regulation. This action sets a strong precedent for other central banks globally, especially those concerned about the monetary sovereignty implications of large, non-sovereign stablecoin adoption, potentially creating a global regulatory schism on stablecoin policy.

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Verdict

The Bank of England’s proposed quantitative stablecoin caps represent a decisive, high-friction regulatory pivot that mandates a fundamental restructuring of user-facing compliance systems and strategically limits the UK’s ambition as a scaled digital asset hub.

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