Bank of England Signals More Flexible Approach to Stablecoin Regulation

Highlights:

• The Bank of England may soften stablecoin rules after strong pushback from crypto firms.
• The BoE is reviewing strict holding limits for individuals and businesses using UK stablecoins.
• Stablecoin issuers may also get easier reserve rules to support growth and profitability.

The Bank of England (BoE) is preparing to soften parts of its planned stablecoin rules after strong pushback from the digital assets industry. According to a Financial Times report published on Thursday, the UK central bank is now reviewing whether some of its earlier proposals were too strict for a market it also wants to support.

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Sarah Breeden, the Bank of England’s deputy governor for financial stability, told the Financial Times that the central bank is “looking very hard” at other ways to manage risks linked to stablecoins. Her comments show that the Bank still wants strong safeguards, but it may change how those rules are applied.

Stablecoins are widely used in crypto trading because they allow users to move money quickly without leaving the digital asset market. However, regulators worry that large stablecoin use could affect banks if people move too much money out of bank deposits.

Sterling-based stablecoins remain very small today. The Financial Times reported that they make up less than 0.5% of the roughly $315 billion global stablecoin market. Still, the Bank of England wants rules in place before the market grows further.

JUST IN: 🇬🇧 Bank of England to scale back plans for strict stablecoin rules following crypto industry pressure.

— Watcher.Guru (@WatcherGuru) May 14, 2026

Bank of England May Ease Strict Stablecoin Holding Limits

One of the Bank’s most debated proposals was a temporary limit on the amount that UK stablecoin users could hold. The plan would restrict individuals to £20,000 per stablecoin and businesses to £10 million. The Bank proposed these limits to reduce the risk of a sudden shift of money away from commercial banks. If stablecoins become widely used for payments, some deposits could leave banks and move into digital tokens instead. That could affect how banks fund lending to households and businesses.

However, crypto firms argued that the limits would be difficult to manage in practice. Breeden said the industry had warned that the Bank’s proposed way of applying these temporary limits would be “cumbersome operationally.” She said the Bank is now open to other ways of reaching the same goal. The main aim is still to protect financial stability, but the central bank appears willing to consider a simpler system.

BoE Reconsiders Stablecoin Reserve Plan

The BoE is also reviewing another major proposal. Under the earlier plan, stablecoin issuers would have to keep at least 40% of the assets backing a UK stablecoin on deposit at the central bank. These deposits would not earn interest. The remaining assets could be held in sovereign bonds and other liquid assets.

Crypto firms opposed this idea because it could make UK stablecoins less profitable to operate. If issuers must keep a large share of reserves in non-interest-paying deposits, they may earn less than they would under rules in other markets.

Breeden said the 40% requirement was based on recent examples of liquidity stress, including the speed of withdrawals from Silicon Valley Bank in 2023. However, she also said the Bank would review whether its thinking had been “overly conservative.”

The shift matters for the UK’s digital asset plans. Crypto companies have warned that strict rules could make the country less attractive as other markets move faster on stablecoin regulation. The Bank, however, continues to stress that stablecoins are a form of money and must remain safe for users.

Breeden said the central bank wants a regime where stablecoins can succeed and deliver benefits. At the same time, it wants to make sure this new form of money does not create wider risks for the financial system.

For now, the Bank of England has not confirmed the final shape of its stablecoin framework. But Breeden’s comments suggest the regulator is moving toward a more flexible approach after listening to industry concerns.

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