Key Takeaways
- Breeden framed the caps as transitional tools rather than fixed ceilings
- She highlighted that the proposed holding limits were set in place to prevent a large-scale migration of deposits from banks into stablecoins
Britain’s central bank, Bank of England’s Deputy Governor Sarah Breeden hinted that UK regulators maybe rethinking the limits set on stablecoin holdings against the backdrop of widespread backlash from the digital asset industry.
Breeden, appeared before the House of Lords Financial Services Regulation Committee on Wednesday, highlighted that the proposed holding limits were set in place to prevent a large-scale migration of deposits from banks into stablecoins.
She added, “We are genuinely open to other ways of achieving the objective. I think you’ve heard from other people as part of your inquiry that this risk to the provision of credit is real.”
The holding limits, Breeden told lawmakers, are not punitive by design. “We proposed holding limits as a way of managing that risk. We are open to feedback on other ways of achieving it. But I think you would expect us as the financial stability authority to ensure that there isn’t a precipitous drop in credit to the businesses and households in the UK,” Breeden added.
“There is this concept of an unhosted wallet, you haven’t got a wallet provider who is a regulated entity who is ensuring that AML [anti-money laundering] KYC [know your customer] criteria are complied with. Unhosted wallets will not be permissible in the UK; they are permissible in the US regime,” Breeden said. She acknowledged this puts Britain at odds with the United States, where self-custody is permitted under the emerging federal approach, but gave no indication the BoE was inclined to follow suit.
The central bank also noted it would keep a close watch on risks flowing from unhosted wallet activity more broadly, even where it cannot regulate it directly.
An update to the draft regulations is pencilled in for June, and Breeden framed the caps as transitional tools rather than fixed ceilings.
