- The Bank of England is reconsidering some of its strictest stablecoin proposals after admitting the rules may have been overly cautious
- Original plans would have capped consumer stablecoin holdings at £20,000 and forced issuers to keep 40% of reserves at the BoE earning zero interest
- Growing pressure from the US and EU regulatory progress appears to be pushing the UK toward a more competitive approach
The Bank of England is quietly softening its stance on stablecoins after months of criticism from crypto companies warning the UK was at risk of regulating itself out of the market entirely.
Deputy Governor for Financial Stability Sarah Breeden acknowledged this week that the central bank may have been too conservative in its original proposals and confirmed officials are now actively reassessing some of the framework’s most controversial restrictions.
The Original Rules Were Extremely Restrictive
The initial proposals unveiled in late 2025 were among the toughest stablecoin rules discussed anywhere globally.
Under the plan, individuals would have been limited to holding just £20,000 worth of sterling stablecoins, while businesses would have faced a £10 million cap.
At the same time, issuers would have been required to park at least 40% of reserves directly at the Bank of England itself — earning zero interest. The remaining reserves could only be allocated to highly liquid low-risk assets like government bonds.
Crypto firms argued the structure would make UK stablecoins economically unattractive and operationally inefficient almost immediately.
The UK Is Starting To Feel Regulatory Pressure
The policy reassessment comes as other major jurisdictions continue moving aggressively into stablecoin regulation.
The United States recently advanced the GENIUS Act framework, while Europe’s MiCA rules have already been live since mid-2024.
Against that backdrop, UK regulators are increasingly facing pressure not to isolate Britain from one of the fastest-growing segments of digital finance.
Industry participants warned during the Bank of England’s consultation process that excessively restrictive rules would simply drive innovation offshore — particularly toward the US and EU markets where issuers are receiving far more operational flexibility.
Apparently, those warnings landed.
Stablecoins Are Becoming Too Big To Ignore
Although sterling-backed stablecoins currently represent less than 0.5% of the global market, regulators increasingly view the sector as strategically important for future payment infrastructure.
The global stablecoin market has already grown to roughly $318 billion, dominated primarily by dollar-backed giants like Tether’s USDT and Circle’s USDC.
Standard Chartered now projects the sector could eventually expand to $2 trillion by 2028, potentially generating around $1 trillion in additional demand for US Treasury bills alone.
That kind of growth is forcing central banks to balance financial stability concerns against the risk of falling behind technologically.
The BoE Is Still Nervous About Financial Stability
Breeden emphasized that many of the original reserve proposals were shaped by stress events like the Silicon Valley Bank collapse, where liquidity mismatches exposed vulnerabilities across parts of the financial system.
The Bank of England remains concerned about stablecoin runs, redemption pressure, and broader systemic spillover risks if the sector grows significantly larger.
But honestly, the tone has clearly shifted.
Instead of asking whether stablecoins should exist inside the UK financial system at all, regulators now appear focused on figuring out how to keep them competitive without losing control of financial stability oversight in the process.
