Key Highlights
- The Bank of England (BoE) proposed a temporary limit, capping individual holdings of “systemic stablecoins” at £20,000 and £10 million for businesses.
- Stani Kulechov, the founder of Aave, publicly slammed the proposal, calling it a “step backward” that is essentially “choking the market.”
- He mentioned that it’s making UK stablecoins “inefficient, uncompetitive, and unattractive,” labeling the UK and consumers “losers.”
Stani Kulechov, the co-founder of Aave, has criticized the Bank of England’s (BoE) new proposal to temporarily cap individual stablecoin holdings at £20,000 and a £10 million cap per firm.
Kulechov’s comments reflect a growing tension between central bank regulators seeking to manage systemic risks and DeFi industry leaders promoting open and permissionless financial systems. He stated on X that the move is essentially “choking the market before it can grow.”
The Bank of England published a consultation paper outlining its regulatory framework for sterling-denominated “systemic stablecoins,” i.e., tokens used for payments and pegged to the British pound. The plan aims to protect financial stability during the digital money transition.
Kulechov’s comment on the proposal
Kulechov noted that these stablecoins would prove “inefficient, uncompetitive and unattractive compared with global alternatives.” He also expressed his concern about HM Treasury potentially following the BoE’s path, with the policy fostering only negative outcomes.
He called the UK and its consumers “losers.” According to him, this move was a missed opportunity and a misguided effort on the BoE’s part.
A user replied to his post, saying, “Completely agree — this approach misunderstands what makes stablecoins powerful in the first place.”
Broader context
Under the proposal, individuals would be restricted to holding £20,000 in any systemic stablecoin, while businesses would be capped at £10 million. The bank justified these measures as necessary to manage the risk of rapid, large-scale deposit outflows from traditional commercial banks, which could impair lending to households and businesses. These limits would remain until regulators judge the risk of such outflows to have subsided.
The BoE’s framework also establishes backing and oversight requirements for systemic stablecoin issuers. Issuers would hold up to 60% of their reserves in short-term UK government debt, with the remaining 40% held as unremunerated deposits at the Bank of England.
There is still time for BoE
While the Bank of England claims the proposals balance innovation with safety, Kulechov argues that placing such restrictive caps could hinder the growth of the UK’s fintech sector.
The consultation period for the proposed rules is open until early 2026, giving the crypto industry and traditional financial (TradFi) institutions time for changes before the final framework is implemented.
Also Read: Bank of England Proposes £20,000 Limit on Stablecoin Holdings
