UK Crypto Groups Disapprove of Bank of England's Plan to Cap Stablecoin Development
The Bank of England has proposed a new regulatory measure that could impact the crypto ecosystem, particularly stablecoins and tokens like SHIB. The proposal aims to prevent potential disruptions to the conventional financial system by imposing individual holding limits on systemic stablecoins for private individuals.
According to the proposal, the individual caps on digital pounds would range from 10,000 to 20,000 pounds. However, this move has been met with criticism from UK crypto industry groups, who argue that the proposal is costly, hard to enforce, and could put the UK at a competitive disadvantage internationally.
Officials at the Bank of England have expressed concerns that without limits, stablecoins could trigger large withdrawals from traditional bank deposits, potentially threatening credit availability and financial stability. This concern stems from the possibility of stablecoins acting as a substitute for traditional banking deposits, leading to a decrease in liquidity in the banking system.
Tom Duff Gordon, vice-president of international policy at Coinbase, has stated that imposing stablecoin caps is bad for UK savers, the City, and sterling. He argues that these caps could limit the potential for growth in the crypto sector and hinder the UK's position as a global financial hub.
Simon Jennings, executive director of the UK Cryptoasset Business Council, has further argued that imposing individual stablecoin limits is impractical due to the lack of real-time visibility of token holders. He raises concerns about the complexities and costs associated with enforcing such limits.
The Financial Times published a report on the crypto groups' pushback against the Bank of England's proposed stablecoin limits. The report highlights the concerns of the crypto industry about the potential impact of these limits on liquidity, investor confidence, and the overall growth of the crypto sector in the UK.
It's important to note that even though SHIB is not a stablecoin, its market activity could be affected by stablecoin regulations. Tighter rules on stablecoins could indirectly constrain SHIB market activity, leading to slower trading volumes, wider spreads, and less efficient price discovery.
In contrast, UK interest rate cuts could spark crypto buzz, potentially leading to a demand surge for SHIB. However, UK-based SHIB traders could face reduced liquidity due to potential stablecoin caps or restrictions.
As always, readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions. The regulatory landscape in the crypto ecosystem is constantly evolving, and it's essential to stay informed and understand how these changes could impact your investments.
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