How long will the Bank of England’s “tight leash” on stablecoins last?

The Bank of England has recently sent a strong signal: the cap on stablecoin holdings will not be lifted easily.

Deputy Governor Sarah Breeden was blunt—what would happen if stablecoins were allowed to expand without limits in the UK? Liquidity in commercial banks could dry up, loans to businesses and households could shrink, and the entire financial system could be shaken.

The Real Considerations Behind the Restrictions

The UK’s approach appears quite “conservative”: individuals can hold a maximum of £10,000–£20,000 in stablecoins, companies £10 million, and large corporations may receive exemptions. But behind this framework, the central bank is actually asking a fundamental question—when digital assets become the new “piggy bank,” how will traditional banks survive?

The division of regulatory responsibilities is also interesting: the Bank of England focuses on pound sterling stablecoins (due to high systemic risk), while others are left to the Financial Conduct Authority (FCA) for more relaxed oversight. At the same time, the central bank is working with the Treasury to design a “stablecoin failure contingency plan”—in case a major stablecoin collapses, how can the wider financial system be protected?

The “Shadow War” Between the US and UK on Stablecoins

Interestingly, the UK’s cautious approach highlights a reality: the US has already taken the lead. The newly passed GENIUS Act has given the green light to US dollar stablecoins, and now the UK is playing catch-up—imposing limits while observing, afraid to fall behind but also wary of instability.

To sum it up: the Bank of England’s attitude is, “You can play with stablecoins, but I have to ensure the banking system doesn’t collapse and financial stability isn’t threatened.” How long will this “ensuring” last? That depends on how the market evolves.