The Bank of England has confirmed that its planned restrictions on stablecoin usage are not meant to last.
Deputy Governor Sarah Breeden recently explained that these controls are only intended to help the financial system adjust to changes as digital currencies gain ground.
Speaking at DC Fintech Week on October 15, Breeden clarified that these limits would serve as a short-term measure.
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According to her, the Bank of England wants stablecoins to have a place in the system but needs time to track how they are adopted and how they might change the flow of money across the economy.
She stated that once it is clear that stablecoin use no longer affects the supply of credit to businesses and households, the restrictions would be lifted.
A consultation process will be launched soon. The Bank of England plans to collect feedback from the public and industry about how these rules should work, especially for sterling-based stablecoins used in large payment systems.
The main concern is that a shift of funds from banks to stablecoins could decrease the amount banks can lend. In the UK, lending to households and companies relies more on banks than in countries like the US, so any sudden changes could cause real issues.
To prevent this, the Bank noted that placing limits on stablecoin use is the best way to manage risk while allowing space for digital money to grow safely.
Recently, nine European banks began collaborating on a digital currency linked to the euro. What did they say about the digital euro? Read the full story.
