The Bank of England is preparing to soften parts of its proposed stablecoin framework after months of criticism from crypto firms, payments companies, and legal experts who warned the original rules could damage the UK’s position in digital finance.
According to the Financial Times, BoE Deputy Governor Sarah Breeden said the central bank is reassessing key parts of the proposal, including temporary holding caps and reserve requirements tied to sterling-backed stablecoins.
The move comes as regulators across the U.S., Europe, and Asia compete to establish clearer rules for stablecoins while trying to attract digital asset businesses and blockchain investment.
Key Takeaway
- The Bank of England is reconsidering its proposed stablecoin caps and reserve rules after industry backlash.
- Officials are reviewing limits that would cap individual holdings at £20,000 and require 40% of reserves to sit at the BoE.
- Crypto firms argued the rules could make UK stablecoins uncompetitive against U.S. and EU markets.
- Deputy Governor Sarah Breeden said the BoE is open to alternative approaches after feedback from the industry.
- The move signals the UK may adopt a more flexible stance to support stablecoin growth and digital finance innovation.
BoE Reconsiders Stablecoin Limits
Under the Bank’s original proposal released in late 2025, individuals would have been restricted to holding no more than £20,000 ($27,000) in a single sterling stablecoin, while businesses would face a temporary £10 million ($13.5 million) limit. Issuers were also expected to hold at least 40% of their reserves in non interest bearing deposits at the Bank of England, with the remaining reserves held in highly liquid assets such as short-term UK government bonds.
Industry groups strongly opposed the framework, arguing the restrictions were too aggressive and would make UK issued stablecoins less competitive than dollar backed alternatives already dominating global crypto markets.
Speaking to the FT, Breeden acknowledged that some parts of the proposal may have been too restrictive.
She also suggested the BoE is reassessing its reserve requirements.
Industry Warned UK Could Fall Behind
The proposed rules were originally designed to prevent sudden outflows from commercial banks into stablecoins if digital payments adoption accelerated rapidly. Bank officials have consistently argued that stablecoins used for mainstream payments must meet standards comparable to traditional financial infrastructure.
However, crypto firms warned the restrictions could discourage institutional adoption and limit practical use cases such as treasury management, settlements, payroll systems, and tokenized financial markets.
Dollar backed stablecoins such as USDT and USDC currently dominate the global stablecoin market, which has grown to roughly $300 billion, while sterling backed tokens remain a very small segment of the industry.
Katie Haries, Coinbase’s head of policy for Europe, welcomed signs that the Bank may revise the framework.
Legal experts and digital asset companies also criticized the reserve structure, arguing that forcing issuers to keep large portions of reserves idle at the central bank would significantly reduce profitability.
Global Stablecoin Competition Intensifies
The Bank of England’s reassessment comes as governments worldwide move to establish clearer stablecoin rules.
In the United States, lawmakers recently advanced the GENIUS Act, which introduced federal standards for reserve backing and disclosure requirements for stablecoin issuers. The European Union has also moved ahead with its Markets in Crypto Assets (MiCA) framework without imposing strict ownership caps. Meanwhile, the UK government and regulators continue positioning the country as a potential hub for regulated digital finance.
The Financial Conduct Authority recently expanded stablecoin testing through its regulatory sandbox initiative, while lawmakers continue refining broader crypto legislation tied to the Financial Services and Markets Act.
Bank of England Governor Andrew Bailey recently stressed that stablecoins may eventually require coordinated international oversight if they become widely used for payments.
UK Searches for a Middle Ground
For UK regulators, the challenge now is balancing financial stability concerns with the need to remain competitive in a rapidly growing digital asset market. Updated draft proposals are expected before the end of June, with a finalized framework likely later this year.
The outcome could determine whether sterling-backed stablecoins emerge as serious competitors in global digital payments or continue to trail behind dollar-based alternatives already entrenched across crypto markets.
