The cryptocurrency industry is urging the Bank of England to reconsider its intention to proceed with the "upper limit on individual and corporate stablecoin holdings."

As background, the Bank of England is expected to launch a policy consultation on the systemic stablecoin framework in the fourth quarter of this year. In recent months, Deputy Governor for Financial Stability, Sarah Breeden, has repeatedly mentioned plans to advance a proposal for imposing holding limits of £10,000–20,000 for individuals and £10 million for corporations on all systemic stablecoins that may circulate in the UK.

As the legislation approaches a critical phase, the cryptocurrency community is stepping up its objections to this proposal.

Tom Duff Gordon, Vice President of International Policy at U.S.-based crypto exchange Coinbase, stated: "Imposing caps on stablecoins is bad for UK savers, bad for the City of London, and bad for the British pound. No other major jurisdiction considers such caps necessary."

A larger issue is that the mere establishment of holding limits could erode the advantages of stablecoins over traditional banking, such as cheaper and more convenient cross-border payments.

According to Simon Jennings, Executive Director of the Cryptoasset Business Council in the UK, stablecoin issuers cannot always know who holds their tokens. Therefore, enforcing holding limit rules would require building an expensive and complex new system, such as digital identity verification or real-time coordination mechanisms across different wallets.

From the Bank of England’s perspective, such restrictions are intended to prevent stablecoins from disrupting the traditional banking system. The central bank has indicated that the proposal for stablecoin holding limits may be "transitional," to be implemented as the financial system adapts to the growth of digital currencies.

In a recent speech, Sasha Mills, Executive Director for Financial Market Infrastructure at the Bank of England, stated that holding limits would mitigate "financial stability risks from large and rapid outflows of deposits from the banking system," such as a sudden reduction in credit supply to businesses and households, as well as risks that may arise as new payment systems scale.

Undoubtedly, if the Bank of England formally proposes this rule, it will intensify tensions with the UK Treasury. Chancellor Rachel Reeves stated in July that she aims to promote the development of blockchain technology, including tokenized securities and stablecoins.

According to the latest data from CoinMarketCap, the total global circulation of stablecoins has surpassed $300 billion, with the vast majority being dollar-denominated stablecoins. Coinbase has projected that the industry could grow to $1.2 trillion by 2028.

For financial regulators outside the United States, in addition to the inherent risks of cryptocurrencies, the potential weakening of their domestic currencies is also a concern. Previously, European Central Bank officials warned that the rise of dollar-pegged stablecoins could lead to "dollarization" in the eurozone, emphasizing the need to "defend monetary sovereignty."