BoE May Ease Stablecoin Rules Amid Industry Pushback

The Bank of England (BoE) is reconsidering its proposed cap and reserve requirements for pound sterling stablecoins following significant pushback from the crypto industry. The central bank’s original framework, outlined in November 2025, introduced holding limits and stringent reserve mandates that many argued could stifle adoption and render UK-issued stablecoins uncompetitive.

Under the initial proposal, individuals would be capped at holding £20,000 (approximately $27,000) in sterling-denominated stablecoins, while businesses faced a £10 million ($13.5 million) ceiling during a transition period. Issuers were also required to hold at least 40% of their reserves as non-interest-bearing deposits at the BoE, with the remainder in high-quality liquid assets like UK government bonds. These measures aimed to prevent systemic risks such as sudden deposit outflows from commercial banks.

However, industry groups and potential issuers criticized the caps as operationally complex and impractical for institutional use cases like corporate treasury, payroll, and settlement. Deputy Governor Sarah Breeden recently signaled the BoE’s willingness to revise these rules, stating that the central bank is exploring alternatives to the proposed temporary holding limits and reexamining the reserve requirements.

Balancing Innovation and Stability

The BoE’s regulatory rethink reflects its broader challenge: fostering a competitive environment for digital assets while safeguarding financial stability. Sterling-pegged tokens currently account for a negligible share of the $300 billion global stablecoin market, which is dominated by dollar-backed assets such as USDT and USDC. Without a viable regulatory framework, the UK risks losing ground to jurisdictions like the U.S. and EU, which are seen as more accommodating to stablecoin innovation.

In February 2026, the Financial Conduct Authority (FCA) selected four firms to test stablecoin models in its Regulatory Sandbox. Meanwhile, a draft amendment to the Financial Services and Markets Act 2000 was published in April, clarifying the authorization framework for UK stablecoin issuers. Together with the BoE’s proposals, these efforts form a coordinated push to establish the UK as a leader in regulated digital finance.

Global Competition Heats Up

The regulatory landscape for stablecoins is becoming increasingly competitive. While the EU’s MiCA regime does not impose holding caps, it emphasizes robust prudential standards and consumer protections. Similarly, U.S.-based issuers face relatively light-touch federal oversight, making them more attractive to institutional users. In contrast, the BoE’s initial proposals were seen as overly conservative, potentially discouraging adoption of sterling-pegged tokens in both domestic and cross-border markets.

A shift toward more flexible rules could enable UK stablecoins to compete with their dollar-backed counterparts, particularly in areas like onshore crypto markets and international payments. As the BoE finalizes its framework later in 2026, market participants will be watching closely to assess whether the UK can strike the right balance between fostering innovation and ensuring financial stability.

While details of the revised regime remain unclear, the BoE’s willingness to adapt signals a recognition of the industry’s concerns. If the UK successfully positions itself as a stablecoin-friendly jurisdiction, it could attract significant investment and cement its role as a global hub for digital assets.