Bank of England rethinks sterling stablecoin rules in UK digital asset push

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BoE rethinks sterling stablecoin rules

Highlights

Bank of England is reconsidering proposed individual caps of £20,000 and business caps of $13.5 million on sterling stablecoin holdings after industry pushback.
The BoE may revise the requirement that at least 40% of stablecoin backing assets be held in non-interest-bearing central bank deposits due to concerns over market competitiveness.
Potential changes to reserve and cap rules come as UK lawmakers and regulators seek to attract GBP stablecoin projects against a $300 billion global stablecoin market led by dollar issuers.

Consultation framework faces industry resistance

As reported by the Financial Times, Deputy Governor Sarah Breeden says the Bank of England is reviewing alternatives to temporary limits on how many sterling stablecoins individuals and businesses can hold, and is also examining whether a rule requiring at least 40% of backing assets to sit in non-interest-bearing deposits at the central bank is too conservative.

The proposed regime stems from the BoE's November 2025 consultation on systemic sterling-denominated stablecoins, following options first outlined in a 2023 discussion paper. Under that framework, individuals would be limited to holding up to 20,000 pounds of a given UK stablecoin, while businesses would face a cap of about $13.5 million during an initial transition period.

The central bank argues that such limits are needed to prevent a rapid shift of deposits out of commercial banks and into tokenised money if a stablecoin gains traction for payments. Industry groups and prospective issuers counter that the caps are difficult to monitor across platforms and could discourage institutional uses such as treasury management, payroll and settlement.

UK seeks balance in global stablecoin market

Breeden has been among the more cautious BoE policymakers on stablecoins, warning in November 2025 that weaker safeguards could threaten financial stability. She has backed strict liquidity rules that would require issuers to hold large portions of reserves at the central bank, with the remainder in high-quality liquid assets such as UK government bonds.

Law firms and potential issuers argue that this structure would compress margins and leave UK stablecoin projects less attractive than those launched under U.S. or European Union regimes. That debate comes as the UK government, the Treasury and regulators try to position Britain as a competitive digital asset hub, even though sterling-pegged tokens still represent only a small share of the roughly $300 billion global stablecoin market, which is dominated by dollar-based issuers.

In January, UK lawmakers opened an inquiry into oversight of fiat-backed tokens and heard evidence from industry groups including Coinbase and Innovate Finance. A more flexible final framework on ownership caps and reserve backing could shape whether systemic GBP stablecoins develop into credible options for cross-border payments and domestic crypto markets.

Our earlier report on Kevin Warsh’s Senate confirmation as Federal Reserve chair explained how U.S. lawmakers portrayed the leadership change as a push to re-center the Fed on price stability, inflation control, and its dual mandate. It also highlighted expectations that Warsh would curb perceived mission creep, with potential knock-on effects for interest-rate policy and broader market confidence.

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