- The Bank of England acknowledges that some of its most stringent stablecoin proposals may have been overly cautious and is reconsidering them.
- The original plan was to set a cap of £20,000 on the amount of stablecoins held by consumers and to require issuers to hold 40% of their reserves at the Bank of England, with zero interest on those reserves.
- Increasing pressure from regulatory developments in the United States and the European Union appears to be prompting the UK to adopt a more competitive strategy.
The Bank of England is quietly softening its stance on stablecoins after months of criticism. Several cryptocurrency companies have warned that the UK risks exiting the market entirely due to overregulation.
Deputy Governor for Financial Stability Sarah Briden acknowledged this week that the central bank’s initial proposal may have been overly conservative and confirmed that officials are currently actively reassessing some of the most contentious restrictions in the framework.
The original rules were extremely restrictive.
The preliminary proposal announced at the end of 2025 is one of the most challenging proposals regarding global regulations for stablecoins.
Under this plan, individuals are limited to holding £20,000 in GBP-stablecoins, while businesses are limited to £10 million in GBP-stablecoins.
Meanwhile, the issuer will be required to deposit at least 40% of reserves directly with the Bank of England—these reserves will not earn interest. The remaining reserves may only be allocated to highly liquid, low-risk assets, such as government bonds.
Cryptocurrency companies believe that this structure would almost immediately make British stablecoins economically unattractive and operationally inefficient.
The UK is beginning to feel regulatory pressure
This policy reassessment comes as other major jurisdictions continue to actively advance stablecoin regulation.
The U.S. has recently advanced the Genius Act framework, while Europe’s MiCA rules have been in effect since mid-2024.
Under this context, UK regulators are facing increasing pressure not to isolate the UK from one of the fastest-growing areas in digital finance.
During the Bank of England’s consultation process, industry professionals warned that overly strict regulations would only push innovation overseas—particularly to the U.S. and EU markets, where issuers can enjoy greater operational flexibility.
Clearly, these warnings worked.
The influence of stablecoins is growing and cannot be ignored.
Although stablecoins denominated in British pounds currently account for less than 0.5% of the global market, regulators are increasingly viewing this sector as strategically important for future payment infrastructure.
The global stablecoin market has grown to approximately $318 billion, primarily dominated by dollar-backed giants such as Tether’s USDT and Circle’s USDC.
Standard Chartered Bank now expects the industry to eventually expand to $2 trillion by 2028, potentially generating around $1 trillion in additional demand for U.S. Treasuries alone.
This growth has forced central banks to balance financial stability concerns against the risks of technological lag.
The Bank of England remains concerned about financial stability.
Briden emphasized that many of the initial reserve proposals were driven by stress events such as the collapse of Silicon Valley Bank, where liquidity mismatches exposed vulnerabilities across all parts of the financial system.
The Bank of England remains concerned about stablecoin runs, redemption pressures, and broader systemic spillover risks if the industry scales up significantly.
But to be honest, the tone has clearly shifted.
Regulators now seem less concerned with whether stablecoins should exist within the UK financial system, and more focused on how to keep them competitive without losing control over financial stability regulation in the process.