UK Finance, the trade association for the UK banking and financial services sector, believes banks should not hold more than £5,000 in the digital pound.
According to the organization, otherwise it will lead to a massive outflow of deposits from financial institutions.
UK Finance's announcement comes in response to recommendations from the UK government, which has proposed setting a digital pound holding limit of £10,000-20,000.
The association has added authorities should set clear targets for the use of the new means of payment.
UK Finance has said:
"It is unclear from the consultation what market place the central bank's digital currency should take."
A consultation paper was published this year in the UK outlining the functions of the future CBDC.
According to it, the digital pound will be used alongside cash "for use by households and businesses for their everyday payments needs."