Stablecoin holding limits are a velocity control

Coinbase has published a letter arguing that the Bank of England should remove holding limits on systemic sterling stablecoins at inception.

There’s a lot to welcome in the regime, and they have. Allowing backing assets to sit at the central bank, and potentially granting access to liquidity facilities in stress, is a serious step. That’s not anti-innovation. That’s designing for trust.

But this debate isn’t about speed. It’s about narrow banking dynamics, and that the consequences of this are far from clear. Something in multiple federal reserve comments in the US.

If a retail-scale stablecoin can hold reserves at the Bank and access central bank liquidity, it starts to look economically like a narrow bank liability. At that point, scale is not a marketing question. It’s a funding question.

Deposits don’t just “move”. They migrate from commercial bank balance sheets into a central bank-linked instrument. That has consequences for bank funding costs, lending capacity and the shape of credit creation. That’s the system the BoE is protecting.

Liquidity facilities don’t remove that issue. They shift where elasticity sits and who ultimately absorbs stress.

Holding limits, in that context, are not a judgement on crypto. They are a velocity control while the funding effects are observed in the real world.

Remove them too early and you are running a macro experiment at uncontrolled scale. Even if the control mechanics are not clear the implication will temper the rate of change.

Counterpoint to this is that if transitional limits become permanent ceilings, activity will migrate and the UK will lose influence. Calibration should evolve with evidence.

If we’re serious about building monetary infrastructure, we need to be honest about what we’re building.

A central bank-linked retail liability is not just a product. It changes the structure of the system.

That deserves more than a competitiveness argument, it deserves a rationale on why if this is put in place narrow banking concerns are unfounded.

This is overall a positive direction, but decisions here are critical for stability as well as competitiveness.

This first appeared on LinkedIn on 16 February 2026. If you want to comment or discuss, that’s the place.