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There is no risk of stablecoins "draining deposits" from commercial banks - the only way to do this is through physical cash withdrawals or by loan repayments.

To illustrate, a consumer purchasing say, £1K in stablecoins from an issuer transfers £1k deposits from their bank to the issuer's bank account where it stays until the stablecoins are redeemed or is used to purchase £1k of government bonds where it then is deposited in the bond seller's bank account (government, pension fund etc). Deposits always remain in circulation in the banking system until used to repay loans or exchanged for cash.

I believe the real reason why central banks, the BoE in particular are wary of stablecoins is because central banks have no role in settling payments made with stablecoins. This eliminates the settlement risk and counterparty risk (between settling banks) that arise from the central bank settlement process, so in reality stablecoin payments are less risky than traditional payments between bank accounts at different banks. It also means that commercial banks have less need for reserves at the central bank, thus reducing the central bank's ability to influence lending rates, another reason why central banks are concerned.

I am happy to be proved wrong in this analysis but it helps explain the BoE's stance. However, it is somewhat academic as it is difficult to foresee a GBP stablecoin from becoming systemic for some time.

There is no demand or logic to this:

• contactless transactions are unauthorised - increasing the limit increases the amount that can be taken fraudulently
• contactless fraud is 100%+ higher since the last increase from £45
• strong customer authentication has made a big impact on containing fraud, why relax it and encourage fraud?
• the majority of contactless are now made by smartphones which are more secure and have no limit - contactless by card is declining
• the typical contactless payment is well below £100, this combined with the majority use of smartphones means there is very little demand or need to scrap limits
• the 1.3p contactless fraud rate v the 6.0p overall card fraud rate is a misleading comparison, as the overall rate includes ecommerce and phone transactions where contactless is unusable. More importantly, the UK Finance fraud report shows that contactless fraud is half of all face-to-face card fraud, the only scenario for contactless fraud and the proportion is increasing
• the FCA's own research shows 78% of consumers want to keep limits as they are, why ignore them?
• economic growth is achieved by producing more goods and services - there is no reason or evidence that increasing a contactless limit increases production

What is the real reason for this proposal? 

It will be interesting to see the adoption this gets - the GENIUS act seems very little to do with payments and everything to do with opening up a new channel to create demand for treasuries and T-bills.

The demand for instant, cheap payments is what matters - this is gaining traction in the USA with TCH RTP and FedNow but is limited by the stranglehold cards have on US payments. Even if demand intensifies, it is difficult to see what difference stablecoins will make on domestic US payments, especially given many institutions seem to be planning to issue their own, none of them compatible with each other. 

However, an open mind is the best approach, time will tell how stablecoins develop in the USA and what route they take.