Bank of England to Allow Flexibility on Stablecoin Holding Caps

Highlights:

• The Bank of England plans to relax stablecoin rules for crypto and fintech firms.
• Governor Andrew Bailey now supports stablecoins and wants safe payment innovation.
• Experts warn the UK may fall behind the US and EU in crypto progress.

The Bank of England (BoE) is changing its approach toward digital assets. It now plans to ease some of its earlier restrictions on stablecoin holdings. According to Bloomberg, the BoE plans to offer exemptions to certain firms, especially crypto exchanges and fintech companies that need bigger stablecoin reserves for liquidity and settlements. The central bank is also looking for ways to bring stablecoins into its Digital Securities Sandbox, a testing space that allows blockchain-based financial projects to operate safely under regulation. 

The Bank of England plans to grant exemptions to proposed limits on stablecoin holdings by businesses, indicating a softening stance toward cryptoassets amid growing competition from the US https://t.co/rCaBh2rYA4

— Bloomberg (@business) October 7, 2025

Industry Pushback Prompts BoE to Ease Stablecoin Rules

This move shows a more flexible attitude as the UK tries to stay competitive in the growing global crypto market. Bloomberg reported that the BoE’s change in stance comes after strong industry criticism. Earlier, the BoE and the Financial Conduct Authority (FCA) suggested strict limits on stablecoin holdings. They proposed a £20,000 cap for individuals and £10 million for businesses using “systemic” stablecoins for payments. 

Experts in the crypto industry warned that such strict rules could hurt innovation and drive liquidity away from London. They said growth might shift toward the United States or the European Union, where stablecoin regulations are already more flexible and supportive.

We've invented global, borderless money that lets Finance scale at the speed of technology.

But the Bank of England wants to send all the benefits of this to zero by capping the amount of stablecoins an individual can hold at 20k. pic.twitter.com/5XcDaOkwZ6

— Happy (@happysubstack) September 15, 2025

The Bank of England has recognized the criticism and is now reviewing its earlier plans. Officials are reportedly considering letting systemic stablecoins back into part of their reserves with high-quality assets like short-term government bonds. This change would align the UK’s rules more closely with those in the US and EU, helping to ease industry concerns.

Governor Bailey Reconsiders Stablecoins as UK Falls Behind

Governor Andrew Bailey, once a strong critic of stablecoins, now seems to be rethinking his stance. He had earlier warned that stablecoins could “erode trust in money” and promoted tokenized bank deposits as a safer option. However, his last week’s remarks show a more practical outlook. Bailey said that stablecoins can exist alongside traditional finance, adding, “We have to recognize that innovation in payments will not stop at the edge of traditional banking — the goal is to manage that innovation safely.”

This change matters because banks and fintech firms see stablecoins as a faster and cheaper way to make payments. Bloomberg Intelligence says stablecoins could be used for over $50 trillion in payments by 2030. Their global supply has already passed $300 billion, but sterling-backed tokens are still very small at just $581,000, compared to $468 million in euro-backed coins, according to DefiLlama. Experts say this big gap shows the UK is falling behind in the stablecoin market.

The timing of this change is crucial. The United States, under former President Trump’s GENIUS Act, has already set clear rules for dollar-backed stablecoins. Meanwhile, the European Union’s MiCA framework is already in effect. If the UK delays further, it could lose its standing as a top global fintech hub.