Bank of England Considers Easing Stablecoin Rules

The Bank of England is reconsidering parts of its proposed framework for pound sterling stablecoins after digital asset firms argued that ownership caps and reserve requirements could limit adoption and reduce the viability of UK-issued tokens.

According to comments from Deputy Governor Sarah Breeden reported by the Financial Times, the central bank is reviewing alternatives to temporary restrictions on how much stablecoin individuals and businesses can hold. The BoE is also reassessing whether requiring at least 40% of stablecoin reserves to be held as non-interest-bearing deposits at the central bank may be too restrictive.

The review comes as the United Kingdom seeks to position itself as a competitive hub for digital assets while balancing concerns around financial stability and bank funding. Sterling-backed stablecoins currently represent only a small share of the roughly $300 billion global stablecoin market, which remains heavily dominated by US dollar-pegged assets.

Industry pushes back against ownership caps

The BoE outlined detailed stablecoin ownership limits in a November 2025 consultation paper focused on systemic sterling-backed stablecoins, expanding on ideas first introduced in a 2023 discussion paper. Under the proposal, individuals would initially be limited to holding around 20,000 pounds (approximately $27,000) of a specific UK stablecoin, while businesses would face a cap of roughly $13.5 million during a transition phase.

The central bank argued that such limits were necessary to reduce the risk of large-scale deposit outflows from commercial banks into tokenized forms of money if stablecoins gained widespread adoption for payments. However, industry groups and prospective issuers argued that these restrictions would be difficult to manage across multiple platforms and could discourage institutional adoption in areas such as payroll, treasury management, and settlement services.

Breeden has previously taken a cautious stance on stablecoins. In late 2025, she warned that weakening regulatory standards too much could create risks for financial stability, emphasizing that stablecoins function as money-like instruments and therefore need safeguards comparable to existing payment systems.

At the time, she supported strict liquidity requirements that would require issuers to hold a significant portion of reserves at the central bank, with the remainder invested in highly liquid assets such as UK government bonds. Legal advisers and industry participants have argued that these requirements could significantly reduce profitability and make issuing stablecoins in the UK less attractive compared with frameworks in the United States or the European Union.

UK searches for balanced crypto framework

The evolving discussion reflects the UK’s broader effort to find a middle ground on stablecoin regulation as global regulatory approaches continue to diverge. In January, UK lawmakers launched an inquiry into the regulation of fiat-backed stablecoins, hearing testimony from companies such as Coinbase and Innovate Finance.

At the same time, the Bank of England and the UK Treasury continue refining a framework intended to operate alongside wider crypto regulations and potential plans for a digital pound. Katie Haries, head of policy for Europe at Coinbase, said the BoE’s willingness to reconsider its proposals sends an important signal to the industry.

“We’ve said for a long time that a cap on stablecoin holdings is a cap on innovation,” she said, warning of “real and significant risks for UK competitiveness.” She added that building a framework where stablecoins can develop successfully while benefiting users is “exactly the right ambition,” and aligns with what both the crypto sector and consumers are seeking.

A more flexible approach to ownership limits and reserve requirements could ultimately shape whether GBP-backed stablecoins become meaningful competitors to dollar-based alternatives in cross-border payments and domestic crypto markets.

Sources:

https://www.reuters.com/sustainability/boards-policy-regulation/bank-englands-breeden-says-diluting-stablecoin-rules-further-could-damage-2025-11-11/

https://www.bankofengland.co.uk/paper/2023/dp/regulatory-regime-for-systemic-payment-systems-using-stablecoins-and-related-service-providers

https://www.bankofengland.co.uk/paper/2025/cp/proposed-regulatory-regime-for-sterling-denominated-systemic-stablecoins

https://cointelegraph.com/news/boe-signals-softer-uk-stablecoin-regime-after-industry-backlash

https://www.ft.com/content/8a17d769-4e8a-4655-8aec-a683e7147322?syn-25a6b1a6=1

https://www.ft.com/content/d80b21d7-2c7b-4727-ace9-4f752c057c7b?syn-25a6b1a6=1

https://defillama.com/stablecoins