Crypto Industry Unfazed by Possible Exemptions from the Bank of England’s Stablecoin Cap

News that the Bank of England could grant certain exemptions to its plans stable currency The holding cap has been greeted with muted enthusiasm from the UK crypto industry, with stakeholders calling for the proposed limits to be ‘recalibrated’.

The potential waiver would allow crypto exchanges and other large entities to exceed the £10 million ($13.3 million) limit for businesses.

This holding limit drew criticism from the UK crypto industry in September, when it emerged that the central bank planned to go ahead with a previously discussed limit, which would also ban individuals from holding more than £10,000 or £20,000 ($13,300 or $26,600) of stablecoins.

According to a source cited Bloombergthe Bank of England has now changed its approach, which it originally justified in terms of protecting financial stability.

People familiar with the matter have also said that the Bank of England will include stablecoins in the UK Digital Securities Sandbox, which was launched by the UK Treasury in late 2023 as a way to test new payment technologies.

“Cumbersome” shopping cap

While this could be taken as a sign that the central bank’s approach to stablecoins and crypto is liberalizing, the potential exemption does not go far enough for some industry commentators.

“While there are indications in the press that this policy may be reviewed, we believe it remains vital that these limits are recalibrated,” said Simon Jennings, executive director of the UK Cryptoasset Business Council, speaking to Declutter.

Jennings explained that the cap on residential users, who do not qualify for an exemption, risks becoming “cumbersome, costly and potentially unworkable” in practice.

The impracticality of a cap is also highlighted by Varun Paul, senior director of financial markets at Fireblocks, who was previously head of fintech at the Bank of England.

“Because people can have many different wallets, it becomes very difficult to monitor their total holdings,” he said Declutter. “It is unlikely to place that responsibility on stablecoin issuers because stablecoins are bearer assets and the issuer does not (and should not) know the identity of all holders at any point in time.

Similarly, Paul noted that it is also impractical to place the burden of enforcement on individual wallet providers because this would require sharing data with other providers, which could violate privacy rights.

Jennings argued that “more sophisticated macroprudential tools, based on transparency and supervisory reporting, would be far more effective in enabling scale while maintaining financial stability.”

Paul suggested that there are natural limits to holding stablecoins, as such cryptocurrencies do not pay interest, unlike traditional savings accounts.

And while he acknowledged that stablecoin issuers may be able to pull “some of the unused balances” away from British banks, the proposed limit for individuals could ultimately be largely irrelevant.

“Given that the vast majority of the UK population has less than £5,000 in their current account, you could argue that the balance limits will do nothing to stop those unused current account balances moving away from UK banks,” he explained.

While the proposed limit has angered the UK crypto industry, the Bank of England discussion paper makes it clear that the incoming limit “would be increased or abolished entirely if the Bank believes that risks to financial stability have been mitigated.”

According to some figures, such a removal cannot come soon enough, given that it could send the wrong signal to the sector.

Asher Tan, CEO of CoinJar, noted that the US crypto industry has seen accelerated growth in recent months Declutter that Britain could struggle to feed its own crypto sector if it implements strict caps.

He argued that Britain has “missed similar traction in stablecoin innovation,” adding that a stablecoin limit would “increase hostility to what should be a competitive game for Britain, which sees itself as a global center for finance.”