Bank of England stablecoin rules face rethink as deputy flags caps

The Bank of England stablecoin rules are heading for a rethink after months of pushback from crypto and payments groups, with senior officials now suggesting the original framework may have been too tough to work in practice. The shift matters because it points to a UK central bank that is trying to balance financial stability with a stablecoin market that can actually function as a payments tool.

That change in tone became clearer after Deputy Governor Sarah Breeden said the proposal may have been “overly conservative.” For an industry that had warned the rules could choke adoption before it started, that was not a small admission.

It also highlights a bigger tension inside UK stablecoin regulation. The Bank of England still wants safeguards around a new form of private digital money, especially if it grows large enough to matter for the banking system. However, the backlash from industry and lawmakers appears to have forced a fresh look at how those safeguards would work on the ground.

BoE moves to ease Bank of England stablecoin rules

The Bank of England is set to water down its planned stablecoin rules and is exploring other ways to meet the same policy goal. At the center of the debate is a simple question: how do you let stablecoins succeed without creating new risks for banks and the wider financial system?

The central bank’s concern has been clear. It said the proposed limits were designed to reduce financial stability risks from large and rapid outflows of deposits from the banking sector. In other words, if people and businesses moved too much money too quickly into stablecoins, traditional bank funding could come under pressure.

Now, though, the Bank appears more open to adjusting the design. Breeden said officials are “genuinely open to thinking whether there are other ways of achieving our objective” of building a regime where stablecoins can succeed and still deliver benefits to users.

That is a notable shift. It suggests the Bank of England stablecoin rules may not just be softened at the edges, but reworked in a way that keeps the safety goal while easing the operational burden that critics said made the original plan impractical.

What the original proposal would have required

The current debate stems from a November consultation paper in which the Bank of England proposed a temporary cap on stablecoin ownership.

Under that plan:

• Individuals would have faced holding limits of £10,000 to £20,000
• Businesses would have faced a £10 million limit
• Systemic stablecoin issuers would have had to hold at least 40% of reserves as unremunerated deposits at the central bank

The reserve requirement was especially important. The Bank said systemic issuers should keep at least 40% of the reserves backing the token as unremunerated central bank deposits, a structure meant to support robust redemption and public confidence even under stress.

This is where the policy became unusually restrictive. Caps on ownership and mandatory low-yield reserve holdings may make sense from a stress-management perspective, but they also directly affect how useful and profitable stablecoins can be.

That is one reason the details drew so much attention. Stablecoin policy is not just about crypto. It is about whether the UK wants these instruments to function at meaningful scale inside its payments system.

Industry and lawmakers push back on UK stablecoin regulation

The strongest criticism came from UK crypto and payment groups, which argued the proposed limits were too cumbersome and out of step with the government’s broader ambition to support digital asset innovation.

Simon Jennings, executive director of the UK Cryptoasset Business Council, said “limits simply don’t work in practice,” arguing that enforcing caps would require a “costly, complex new system, such as digital IDs or constant co-ordination between wallets.”

That criticism went beyond industry lobbying. UK lawmakers also opposed the restrictions, warning they could undercut efforts to position the country as a major destination for digital asset activity.

Breeden’s comments suggest the Bank heard that message. She said the way the limits were proposed was “cumbersome operationally for a temporary measure,” a recognition that even if a rule looks sensible on paper, implementation can make or break it.

This is one of the key reasons the story matters. For crypto firms, softer Bank of England stablecoin rules could mean a more realistic path to launching or scaling pound-linked products in the UK. For policymakers, it is a reminder that a regime designed around risk alone can lose credibility if it cannot be implemented efficiently.

Why the central bank says it still matters

Even with the softer tone, the Bank of England has not backed away from the core problem it is trying to solve.

Officials have linked the ownership caps to the risk of rapid shifts in deposits out of banks and into stablecoins. They have also defended the reserve requirements as a way to support redemption confidence during periods of liquidity stress.

Breeden said the 60:40 asset allocation requirement was based on experience of potential liquidity stress. That helps explain why the central bank is still cautious even as it reconsiders the mechanics.

This is the other key point in the debate. Stablecoins sit awkwardly between innovation and money-like risk. If they are widely used for payments, they stop being a niche crypto issue and start becoming part of the financial plumbing. That is why the Bank wants a regime where stablecoins can succeed, but not in a way that weakens confidence during a shock.

The UK’s next test on stablecoin policy

The immediate takeaway is that the Bank of England stablecoin rules are no longer moving on the same hardline track set out in November. The central bank is still focused on safety, but its leadership now appears to accept that the first version may have leaned too far toward caution.

That leaves the UK with a more practical challenge than a political one: whether it can design UK stablecoin regulation that protects the banking system without making pound-backed tokens too constrained to compete. The answer will shape not just how firms build in Britain, but whether the UK can turn its pro-innovation messaging into a rulebook the market can actually use.