BoE Reconsiders Strict Rules for Pound Stablecoins

The Bank of England is rethinking parts of its proposed regulatory regime for pound sterling stablecoins after digital asset firms warned that strict ownership caps and a large non‑interest reserve requirement could limit adoption and make UK‑issued tokens uneconomic. Deputy Governor Sarah Breeden indicated the central bank is exploring alternatives to temporary holding caps and is reassessing whether a rule requiring 40% of backing assets to be held as non‑interest deposits at the Bank is too conservative.

The proposed sterling stablecoin rules were set out in a November 2025 consultation that built on options first published in 2023. Under the draft framework, individuals would be limited to holding up to £20,000 (about $27,000) of any single UK stablecoin during an initial transition period. Businesses would face higher caps, which the consultation quantified at about $13.5 million. The draft also required a significant portion of backing assets to be held as non‑interest‑bearing deposits at the Bank of England.

UK officials have described the regime as an effort to support growth in digital assets while protecting bank funding and financial stability. Sterling‑pegged tokens currently account for a small share of the roughly $300 billion global stablecoin market, which remains dominated by dollar‑pegged issuers.

In the United States, a report from Moody’s summarized discussions with major banks and found broad agreement that asset tokenization will occur, but that timing and sequence are uncertain. The report noted tokenization activity is low at present, while almost all large banks and major financial market intermediaries have established digital‑asset teams or innovation units and are running pilots to test new infrastructure.

Moody’s outlined three possible outcomes for the financial system depending on the pace of tokenization. Slower uptake would leave current market infrastructure in place longer, while faster adoption could change liquidity and market plumbing more rapidly. The report cited optimistic long‑term market scenarios from some industry forecasters, including projections that tokenized assets and stablecoins could contribute to significant market growth over the next decade.

Meanwhile, Polymarket, a prediction market platform, recorded an 8.9% decline in monthly trading volume in April. Data show Polymarket and its U.S. trading app generated about $10.2 billion in April, down from roughly $11.2 billion in March. Rival exchange Kalshi increased volume by about 13% to roughly $14.8 billion in April. Total monthly volume across major prediction markets rose to about $29.8 billion in April from about $26.5 billion in March.

The Bank of England’s review of the stablecoin proposals will feed into ongoing policy discussions as regulators weigh the concerns of issuers and market participants against objectives to protect depositors and preserve financial stability.