UK-based cryptocurrency industry advocacy groups are criticizing the Bank of England's (BoE) plan to limit individual stablecoin holdings. The BoE is considering capping individual stablecoin holdings between £10,000 ($13,558) and £20,000 ($27,200), and is asking for feedback on a possible lower limit of £5,000. For businesses, the limit is suggested to be around £10 million ($13.6 million). These rules would apply to stablecoins that are widely used for payments or are expected to gain traction soon.

Industry groups are arguing that these limits would be difficult and expensive to implement and could leave the UK lagging behind other jurisdictions. Tom Duff Gordon, Vice-President of International Policy at Coinbase, stated that the limits would be detrimental to UK savers and the pound. He also pointed out that no other major jurisdiction has deemed it necessary to impose caps. Simon Jennings, Executive Director of the UK Cryptoasset Business Council (UKCBC), said that such limits simply wouldn't work in practice. He added that issuers don't have insight into who holds their tokens at any given time, so enforcing caps would require a costly and complex new system.

The BoE's plan would also limit the effectiveness of establishing a transatlantic corridor for payments in stablecoins between the UK and the United States, an initiative the UKCBC is seeking to establish.

The Bank of England fears that stablecoins could destabilize the traditional financial ecosystem. The Financial Policy Committee recognized that stablecoins and crypto markets have expanded significantly in the past year, drawing heightened regulatory attention. The committee noted that even with appropriate regulation, greater use of stablecoins denominated in foreign currencies could make some economies vulnerable to currency substitution. Officials insist the limits could be transitional while the market adjusts to the rise of digital money.

These proposed limits have stirred debate, with some arguing they could stifle innovation and push crypto businesses away from the U.K.. Critics say that enforcing these caps would be practically unworkable, pointing to the difficulties in monitoring decentralized wallets and cross-border transactions, which could lead to unintended capital flight. Trade groups have labeled the proposals as overly restrictive, potentially placing the U.K. at a competitive disadvantage compared to the U.S. and EU, where no such individual limits exist.

The BoE defends its plan as a safeguard against risks to the banking system, as widespread use of stablecoins could drain deposits from traditional banks and weaken the financial system. Sasha Mills, the BoE's executive director for financial market infrastructure, said the aim is to reduce the risks of sudden deposit withdrawals.

The UK's approach contrasts with that of the United States, which passed the GENIUS Act in July, setting rules around licensing, reserves, and redemption standards, but without imposing caps on holdings.