Bank of England Reconsiders Stablecoin Limits, Moves to Ban Self-Custody Wallets

BoE Signals Retreat from £20,000 Stablecoin Cap

The Bank of England is reconsidering its controversial proposal to cap individual holdings of sterling-denominated stablecoins. Deputy Governor Sarah Breeden told the House of Lords Financial Services Regulation Committee that the central bank is now exploring alternatives after its initial plan, which suggested limits between £10,000 and £20,000, drew sharp criticism from the industry.

The proposed caps were designed to mitigate the risk of a mass migration of funds from commercial bank deposits into stablecoins, which the BoE feared could constrict credit availability for UK businesses and households. However, industry groups argued the limits would stifle innovation and signal that the UK is hostile to crypto-asset businesses. In response to this feedback, the bank is softening its stance.

We are genuinely open to other ways of achieving the objective. We are open to feedback on other ways of achieving it.

— Sarah Breeden, Deputy Governor, Bank of England.

UK To Prohibit Self-Custody Wallets in New Regime

While showing flexibility on holding limits, the Bank of England delivered a decisive blow to the UK's decentralized finance landscape by announcing a ban on unhosted wallets. Breeden stated unequivocally that wallets not managed by a regulated entity, which would be responsible for KYC and AML checks, "will not be permissible in the UK."

This policy creates a significant divergence from the regulatory approach in the United States and poses a direct challenge to the principles of self-custody and decentralization. The decision effectively requires all stablecoin activity in the UK to occur through regulated intermediaries, limiting user autonomy and potentially pushing DeFi innovation offshore. Despite this restriction, the government is proceeding with its broader framework, planning to open applications for sterling stablecoin issuers before the end of 2026 and launching a regulatory sandbox in the first quarter of 2026.

Bank of England Reconsiders Stablecoin Limits, Moves to Ban Self-Custody Wallets

Edgen Crypto

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