The Bank of England (BOE) is reportedly reconsidering its stance on proposed limits to corporate stablecoin holdings, signaling a potential shift in its regulatory approach amid industry pushback and growing international competition. Citing sources familiar with the discussions, Bloomberg reported that the BOE is planning to introduce exemptions for certain firms that may need to maintain larger reserves of fiat-pegged assets.
This reconsideration comes in response to intense criticism from the crypto industry, which argues that the initial proposals could stifle growth and put the UK behind other jurisdictions, particularly the United States, which is moving towards clearer regulation through the GENIUS Act signed into law in July.
The BOE had initially proposed caps on stablecoin holdings, suggesting limits of 20,000 pounds (approximately $27,000) for individuals and 10 million pounds for companies. These restrictions were intended to help the central bank maintain control over the money supply, protect consumers, and prevent excessive reliance on privately issued digital currencies like USDt (USDT) and USDC (USDC). The BOE's primary concern was that the widespread use of stablecoins could lead to bank deposit outflows, potentially weakening the financial system.
However, crypto-native companies argued that such caps would constrain their operations, given their need to hold substantial stablecoin reserves for trading and liquidity management. Simon Jennings of the UK Cryptoasset Business Council, for example, stated that the proposed stablecoin limits "simply don't work in practice". There is also a concern that enforcing these caps would require a costly and complex system, potentially involving digital IDs or constant coordination between wallets.
BOE Governor Andrew Bailey had previously voiced concerns about the potential threats posed by privately issued stablecoins to financial stability and the government's ability to conduct monetary policy. However, he has recently adopted a more conciliatory tone, acknowledging that stablecoins may represent a useful innovation capable of coexisting within the broader financial system. He noted that "widely used UK stablecoins should have access to accounts at the BoE in order to reinforce their status as money".
This evolving stance highlights the UK's ongoing effort to balance financial stability with competitiveness in the rapidly growing stablecoin sector. The global stablecoin market has surged to a valuation of approximately $314 billion.
The UK has been developing a regulatory framework for digital tokens pegged to fiat currencies in collaboration with the Financial Conduct Authority (FCA). The FCA has published consultation papers outlining proposed rules for issuing stablecoins, requiring authorization from the FCA. Issuers must identify and manage risks and fully back stablecoins with secure, liquid assets held in a statutory trust. The backing assets must also be segregated from the issuer's own assets, with custodians independent of the issuer.
The BOE's initial proposal to limit stablecoin holdings has faced criticism for potentially hindering innovation and mainstream crypto adoption. Some argue that the limits could negatively impact UK savers and the British pound, as no other major jurisdiction has deemed it necessary to impose such caps. Concerns have also been raised that the BOE's stance contradicts the Treasury's pro-innovation agenda, potentially deepening tensions between the two institutions.
The BOE is expected to publish an official consultation later this year, highlighting its updated approach to regulating stablecoins. Industry representatives are urging the bank to reconsider its proposals and adopt more flexible rules to avoid the UK falling behind in the rapidly evolving digital asset landscape.
