Bank of England rethinks sterling stablecoin rules after pushback

The Bank of England is reconsidering parts of its proposed regulatory regime for sterling-denominated stablecoins after industry objections. Officials are reviewing temporary holding caps and the requirement that 40% of backing assets be held as non-interest-bearing balances at the Bank.

The central bank’s November 2025 consultation proposed limits on how much of a single UK stablecoin an entity could hold during an initial transition. Individuals would be limited to £20,000 per issuer and businesses to roughly £13.5 million. The draft rules would also require at least 40% of a systemic stablecoin’s reserves to be held as non-interest balances at the Bank, with the remainder in high-quality liquid assets such as UK government bonds.

Deputy Governor Sarah Breeden said officials are examining alternatives to temporary holding caps and whether the 40% non-interest reserve requirement is overly conservative. She warned that “diluting the rules too far could damage financial stability” and described stablecoins as “money-like instruments that must be at least as safe and robust as existing payments infrastructure.”

Industry groups, law firms and potential issuers told regulators the proposed caps and reserve structure would be operationally burdensome and hard to supervise across multiple platforms. They said the measures could deter regulated use of UK stablecoins in corporate treasury management, payroll and settlement, and compress issuers’ margins because a large share of reserves would earn no interest.

The consultation follows a 2023 discussion paper and is part of a broader UK effort to set rules for crypto assets while protecting bank funding and financial stability. In January, UK lawmakers opened an inquiry into oversight of fiat-backed tokens and took evidence from industry participants. In April, HM Treasury opened consultations on reforms to rewrite payments rules for stablecoins and tokenized deposits. The Bank of England and the Treasury continue to refine rules that would sit alongside wider crypto regulation and potential plans for a retail digital pound.

Sterling-pegged tokens account for a small share of the roughly $300 billion global stablecoin market, which remains dominated by dollar-pegged issuers. Officials say the reassessment aims to find a middle ground that protects consumers and the financial system without unnecessarily restricting regulated stablecoin use.

The Bank has said any final rules must prevent risks to bank deposits while allowing regulated stablecoins to be used for payments if they meet strict standards for resilience, liquidity and supervision.