The Bank of England recently made headlines by clarifying that its proposed limits on stablecoins are temporary measures aimed at ensuring financial stability rather than stifling innovation. The central bank’s Deputy Governor, Sarah Breeden, emphasized that the proposed limits on stablecoin holdings and transaction sizes are designed to allow the financial system time to adjust while still enabling stablecoins to play a role in the UK’s multi-currency payments system.
Industry groups had initially criticized the proposed thresholds, arguing that they could signal to the market that the UK is not crypto-friendly, potentially driving innovation and investment overseas. However, Breeden confirmed that the Bank of England will launch a consultation before the end of the year to gather feedback and finalize the rules. The consultation will include discussions on higher limits for business accounts, exemptions for supermarkets and large firms, and carveouts for participants in the UK’s digital sandbox.
The central bank’s key concern is the potential risk of a rapid shift of funds from traditional bank deposits into stablecoins, which could lead to a sudden drop in credit for households and businesses. Breeden highlighted that this risk is particularly acute in the UK, where credit heavily relies on banks compared to the US. Despite this concern, she acknowledged that regulated stablecoins and tokenized deposits could have a role in tokenized markets in the future.
The Bank of England’s approach reflects a cautious yet open stance, balancing innovation with financial stability. By leaving the door open for collaboration and further discussions, the central bank aims to navigate the evolving landscape of stablecoins in the UK market.
Overall, the temporary stablecoin limits proposed by the Bank of England have sparked a debate within the industry, with stakeholders closely watching how the regulatory framework for stablecoins will evolve in the UK.
Sources:
1. Cointelegraph: [Bank of England clarifies plan to limit stablecoins is temporary](https://cointelegraph.com/news/bank-england-temporary-stablecoin-limits-uk-policy?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound)
2. Finance Magnates: [Bank Of England Calms Crypto Market Fears, Says Stablecoin Limits Are “Temporary”](https://www.financemagnates.com/cryptocurrency/bank-of-england-calms-crypto-market-fears-says-stablecoin-limits-are-temporary/)
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References:
– Cointelegraph. (n.d.). Bank of England clarifies plan to limit stablecoins is temporary. Retrieved from https://cointelegraph.com/news/bank-england-temporary-stablecoin-limits-uk-policy?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound
– Finance Magnates. (n.d.). Bank Of England Calms Crypto Market Fears, Says Stablecoin Limits Are “Temporary”. Retrieved from https://www.financemagnates.com/cryptocurrency/bank-of-england-calms-crypto-market-fears-says-stablecoin-limits-are-temporary/
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