Bank of England stablecoin rules are now under review. The central bank is reconsidering key parts of its proposed framework after digital asset firms pushed back.
Why? Because strict reserve rules and ownership caps could make pound‑backed tokens difficult to use at scale.
Bank of England stablecoin rules face industry criticism
According to the Financial Times, Deputy Governor Sarah Breeden said the Bank is reviewing two main issues. First, whether temporary holding limits on sterling stablecoins are necessary. Second, if its reserve requirements are too restrictive for issuers.
Under the November 2025 consultation paper, individuals would face a £20,000 holding limit for a single UK stablecoin during an initial transition phase. Corporate users would face caps of roughly $13.5 million.
Officials said these limits would prevent a rapid outflow of deposits from commercial banks if stablecoins gained traction in payments.
Additionally, the proposal required issuers to keep at least 40% of reserves in non‑interest‑bearing deposits at the Bank of England. The remaining assets would go into short‑term UK government debt.
Why Bank of England stablecoin rules are being reconsidered
Industry participants pushed back strongly. They argued that ownership caps would be difficult to enforce across trading venues and wallets.
Potential issuers and legal advisers also told policymakers that forcing firms to park large reserve balances at the central bank without earning interest would significantly reduce profitability for UK‑issued stablecoins.
Sarah Breeden has consistently taken a cautious stance on stablecoins. She previously argued that money‑like digital instruments should meet safety standards comparable to traditional payment infrastructure. Nevertheless, the Bank is now listening to industry concerns.
UK regulators weigh stablecoin competitiveness
While UK regulators continue drafting rules, they face pressure to prevent stablecoin activity from moving to more commercially flexible jurisdictions.
Earlier this week, Bank of England Governor Andrew Bailey warned that international regulators could face a difficult confrontation with the United States over stablecoin oversight. Speaking at a conference, Bailey said global payment use cases require common international standards. He described future talks with Washington as a likely “coming wrestle.”
Bailey also chairs the Financial Stability Board. He repeated concerns that some stablecoins may not be easily redeemable during market stress. Reuters reported that he warned countries like the UK could face redemption pressure if dollar‑backed stablecoins spread internationally without strong safeguards.
Meanwhile, the Trump administration continues backing stablecoin expansion through the GENIUS Act, which established a US framework for issuers. CoinGecko data values the global stablecoin market at over $317 billion, with dollar‑backed tokens dominating.
What happens next?
In London, lawmakers have begun examining how the UK should oversee the sector. In January, parliamentary committees gathered evidence from industry groups, including Coinbase and Innovate Finance. Officials are working on rules that would operate alongside future crypto legislation and potential digital pound plans.
For now, sterling stablecoins account for only a small share of the global market. Any relaxation of reserve rules or holding limits could influence whether regulated GBP‑backed tokens become viable for payments, treasury management, and settlement. Otherwise, firms will likely continue favoring US dollar stablecoins for most activity.