Bank of England Proposes Stablecoin Holding Limits
The Bank of England (BoE) has proposed temporary limits on sterling-backed stablecoins. Individuals would be capped at £20,000 per stablecoin holding. Businesses would face a £10 million cap. The rule applies to “systemic stablecoins” used in payments and pegged to the British pound.
The BoE aims to protect financial stability during the transition to digital currencies. The proposal includes requirements for issuers to back stablecoins with reserves. Up to 60% of reserves must be held in short-term UK government debt. The remaining 40% must be kept as unremunerated deposits at the BoE.
Aave Founder Criticizes Proposal
Stani Kulechov, co-founder of Aave, publicly criticized the BoE’s plan. On X, he called the proposal a “step backward” and said it is “choking the market before it can grow.” Kulechov added that the limits would make UK stablecoins inefficient and uncompetitive compared to global alternatives.
He warned the policy could make the UK and its consumers “losers.” Kulechov expressed concern that HM Treasury might adopt similar rules, which he described as a missed opportunity by the BoE.
A user replying to Kulechov agreed, stating the approach misunderstands what makes stablecoins powerful.
Proposal Background and Next Steps
- The BoE says the limits address risks of rapid deposit outflows from traditional banks.
- The caps will stay until regulators judge the risk has decreased.
- A consultation on the proposal runs until early 2026.
- The crypto industry and financial institutions can submit feedback before final rules are set.
The BoE argues the proposal balances innovation with financial safety. However, critics like Kulechov say the approach could hinder UK fintech growth.
