Critics argue the move would damage the UK’s competitiveness as a financial hub and put it at a disadvantage to both the EU and the US.

The central bank’s plan would cap individual holdings of any systemic stablecoin at between £10,000 and £20,000, with a £10 million limit for businesses. Officials state these measures are necessary to mitigate financial stability risks, such as a sudden flight of capital from the traditional banking system into digital currencies. Sasha Mills, the bank’s executive director for financial market infrastructure, warned of the need to prevent “large and rapid outflows of deposits” that could disrupt lending to households and businesses, Financial Times reports.

However, industry leaders have condemned the proposal as unworkable and detrimental to innovation. “Imposing caps on stablecoins is bad for UK savers, bad for the City and bad for sterling,” said Tom Duff Gordon of crypto exchange Coinbase, noting that no other major jurisdiction has proposed similar limits.

Trade bodies also highlight the practical challenges of enforcement. “Limits simply don’t work in practice,” argued Simon Jennings of the UK Cryptoasset Business Council. He explained that since issuers do not have sight of who holds their tokens, enforcing caps would require a “costly, complex new system”.

The dispute highlights growing tensions between the Bank and the Treasury. Chancellor Rachel Reeves has publicly committed to supporting financial innovation and “drive forward developments in blockchain technology”, a stance that appears at odds with the Bank’s cautious approach.

Academics have warned that the UK is already falling behind in regulating the rapidly growing global stablecoin market, which is forecast to exceed $1 trillion (c. £740 billion) by 2028. Professor Gilles Chemla of Imperial Business School said: “London has the talent, the markets, and the history to lead the digital economy, but the delay in implementing a regulatory framework for stablecoins is eroding that advantage.”

The Bank of England has described the proposed limits as potentially “transitional” and is expected to publish a formal consultation on its plans later this year.