Bank of England Rethinks Approach to Stablecoin Regulations
In an evolving financial landscape, the Bank of England (BoE) is reconsidering its regulatory stance on pound-pegged stablecoins. This shift comes amid criticism from both lawmakers and industry experts regarding proposed policies. The BoE’s willingness to adapt highlights its commitment to fostering a stable and innovative financial environment.
Revisions to Stablecoin Regulatory Framework
The Bank of England’s Deputy Governor, Sarah Breeden, recently announced the institution’s openness to modifying its stablecoin regulation proposals. Initially published for public consultation in late 2025, these proposals included an ownership cap and a 60:40 asset backing split. The BoE aimed to temporarily limit stablecoin ownership to mitigate the risks posed by significant and sudden deposit outflows from the banking sector.
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The November consultation paper suggested individual ownership limits between £10,000 and £20,000, with business caps set at £10 million, akin to the approach for the digital pound. Furthermore, the BoE proposed that systemic stablecoin issuers hold at least 40% of their reserves as unremunerated deposits at the central bank. This measure was designed to ensure robust redemption processes and maintain public confidence, even during periods of financial stress.
Breeden, during a session with the House of Lords Financial Services Regulation Committee, emphasized the BoE’s willingness to explore alternative strategies that could achieve its financial stability goals without resorting to the contentious proposals. Recent reports indicate that the central bank is considering feedback on other methods to manage associated risks.
The Deputy Governor also highlighted the importance of reviewing the 60:40 asset allocation for stablecoins, questioning whether it might be excessively conservative. She noted that this structure is consistent with measures in the United States and has been adopted within the European Union (EU).
Industry Concerns and Reactions
The proposed stablecoin caps have faced technical challenges and criticism from industry stakeholders. Breeden defended the central bank’s stance, arguing that the caps facilitate an orderly transition as the financial system evolves.
Benoit Marzouk, CEO of Tokenised GBP—a notable pound-pegged stablecoin issuer—expressed concerns over the policy’s potential impact. He warned that strict limits could hinder business operations in the UK, emphasizing the difficulty of functioning with a £10 million cap for businesses.
Tom Rhodes, Chief Legal Officer at Agant, a company set to issue a pound-denominated stablecoin, highlighted the administrative burden of monitoring token ownership. The Deputy Governor acknowledged the industry’s pushback, describing it as “very real,” but noted the lack of constructive engagement on alternative solutions.
According to reports by Bitcoinist, a coalition of UK lawmakers has opposed the BoE’s stablecoin policies. They argue that the proposed ownership cap could stifle the UK’s potential in the digital asset sector, drive innovation offshore, and encourage investment in USD-pegged alternatives, positioning the UK as a “global outlier.”
Local crypto industry groups have also criticized the stablecoin cap proposal, labeling it a “step in the wrong direction” and urging the BoE to reconsider. Breeden announced plans for the central bank to release draft rules for public consultation in June. The BoE aims to finalize these regulations by the end of the year, aligning with global regulatory standards.
Conclusion
As the digital financial landscape continues to evolve, the Bank of England’s adaptive approach to stablecoin regulations reflects its dedication to balancing innovation with stability. By engaging with industry stakeholders and considering alternative solutions, the BoE aims to position the UK as a leader in the global digital asset market, ensuring both robust financial stability and growth.
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