Bank of England Reconsiders Tough Stablecoin Plan After Revolt

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The Bank of England is reconsidering parts of its planned stablecoin framework after complaints from crypto firms that the proposed rules were too restrictive. Deputy Governor Sarah Breeden said the central bank is “looking very hard” at alternative approaches, including changes to ownership caps and reserve requirements. The UK has faced criticism for moving slower than the U.S. and parts of Asia in building a competitive digital asset market.

BoE Reconsiders Stablecoin Limits

Indeed, the original proposal would have temporarily limited individuals to holding £20,000 worth of any UK stablecoin, and businesses would have faced a £10 million cap per coin. The BoE said those limits aimed to prevent large deposit outflows from traditional banks if stablecoins gained widespread adoption.

Now the central bank appears willing to revisit the structure, according to a May 14 report. As Breeden told Financial Times:

“What we have heard from industry is that the way we have proposed to implement limits is cumbersome operationally for a temporary measure.”

The BoE is also reviewing another controversial requirement that would force stablecoin issuers to hold at least 40% of reserves directly at the central bank without earning interest. The remainder could be invested in government bonds and other liquid assets.

Crypto firms argued the model would make UK stablecoins far less profitable compared with US competitors. As Breeden explained:

“Perhaps not surprisingly, the industry would prefer to hold more interest-earning assets, as that goes to their bottom line.”

She added the proposal was based on liquidity stress seen during the Silicon Valley Bank collapse and other banking shocks, but acknowledged regulators may have been “overly conservative.”

UK Tries To Stay Competitive in Crypto

The discussion comes as governments worldwide race to establish stablecoin rules without driving companies offshore. Dollar-backed stablecoins dominate the market today, whereas sterling-based stablecoins account for less than 0.5% of the $300 billion sector.

Industry groups have warned that overly restrictive rules could leave the UK behind as tokenized payments and blockchain-based finance continue expanding globally. As Breeden said:

“We are keen to create a regime where stablecoins can succeed and can deliver benefits to the users. (…) But it is money and we want to make sure that this new form of money is safe.”

The Bank of England hasn’t finalized the framework yet, but the latest comments suggest policymakers are becoming more open to compromise as pressure from the crypto sector and traditional financial firms grows.