- UK central bank is reconsidering stablecoin holding caps and reserve rules after consultations, but says it still lacks detailed alternative proposals
- Industry figures argue for lighter, principles-based regulation, questioning bank-style capital demands and calling for remunerated reserves at the Bank of England
The UK central bank is reworking its approach to stablecoins, moving toward a more permissive framework while still pressing industry participants for clearer input on how to manage risks. The Bank of England (BOE) has spent the past year consulting on a new regulatory regime and engaging with firms, but tensions remain over proposed limits, capital rules, and reserve structures for issuers.
Evolving stance of the UK central bank on stablecoins
The UK central bank began a formal consultation on stablecoins in November last year, setting out requirements that many crypto firms argued could hinder innovation. Since then, officials have been in discussions with industry groups, reconsidering issues such as backing requirements and caps on account balances. Observers say the BOE appears more open to adjustments, but key details are still unsettled.
On Nov. 10, 2025, the BOE released a document describing its preferred design for a stablecoin regulatory regime. That paper followed an earlier discussion document that, according to the bank, drew views from banks, non-bank payment providers, payment system operators, trade bodies, academics, and individuals. Critics at the time said the BOE was overstating the systemic risks from stablecoins. Tom Rhodes, chief legal officer at UK-based issuer Agant, described the approach as overly cautious and restrictive.
A major flashpoint has been the proposal to cap holdings at 20,000 pounds for individuals and 10 million pounds for businesses accepting stablecoins as payment. These thresholds were framed as a safeguard against a rapid shift of deposits out of traditional banks into stablecoins, which the BOE fears could destabilize the banking sector. The deputy governor now signals that these limits may be revisited, in response to sustained pushback from the sector.
Dialogue gaps and industry pushback
Speaking to the House of Lords Financial Services Regulation Committee, Deputy Governor Sarah Breeden said the BOE is willing to rethink the proposed holding caps if other ways to address deposit flight risks are identified. She stressed that the limits were intended as one tool to contain potential disruption, but that the bank is “open to feedback” on alternative methods.
Breeden also expressed dissatisfaction with the type of responses received so far. She said that while pressure from firms to change the approach is strong, the industry has largely argued against the measures without offering specific replacement proposals. In her view, feedback has too often taken the form of “don’t do this” rather than concrete solutions to the underlying stability concerns.
Rhodes contests that characterization. He told Cointelegraph that, over the past two years, industry participants have worked through extensive consultation documents from both the Financial Conduct Authority (FCA) and the BOE, joined many roundtables, and filed detailed written submissions individually and via trade associations. The difficulty, he argued, is that both regulators and firms are trying to design a “comprehensive regulatory regime for a market that has yet to develop,” leaving limited hard data to draw on.
Because of that uncertainty, Rhodes argues that lighter, principles-based rules are more appropriate at this early stage. Nick Jones, founder and CEO of UK digital assets platform Zumo, similarly said that industry groups have been operating under tight deadlines to deliver meaningful recommendations. He suggested that feedback could be more practical if the UK central bank adopted the FCA’s Spring model, which uses time-limited workshops to test real-world applications of new technologies.
‘Multi-moneyverse’ vision and regulatory next steps
Breeden used her appearance to underline that the BOE wants to see tokenized money issued by non-banks within the system. She described a future “multi-moneyverse” where different forms of money and payments coexist, with technology enabling faster and cheaper transactions for businesses, households, and financial market users, while trust in money remains central. This concept, first laid out in a speech in September, closely tracks arguments long made by crypto advocates about the benefits of monetary competition.
Rhodes called the inclusion of stablecoins within a competitive “multi-moneyverse” a significant positive shift in the BOE’s thinking. He contrasted Breeden’s remarks with Governor Andrew Bailey’s earlier statements, which, he said, played down the idea of stablecoins as a substitute for commercial bank deposits. Jones added that the BOE’s earlier scepticism toward digital assets has started to recede, and welcomed the recognition that pound sterling-backed stablecoins can operate alongside fiat money.
Jones argued that different forms of tokenized money will serve different niches. In his view, large institutional investors are likely to favour tokenised deposits, while smaller retail payment firms may find more value in the network effects of stablecoins. The sector now awaits the BOE’s final policy position, though Rhodes noted there is still room for revisions before rules are set.
Industry lobbying focuses on three main areas:
- Removing or easing holding caps on stablecoin balances
- Dropping bank-style capital requirements for fully backed issuers
- Redesigning reserve requirements to support commercial viability
Jones said rules that mirror bank capital standards are not appropriate for issuers that fully back their tokens with reserves. Instead, he argued, oversight should target the quality and transparency of those reserves.
Under the BOE’s current proposal, issuers must hold 40% of reserves as unremunerated deposits at the Bank of England and up to 60% in high-quality, short-term UK government debt. Breeden told Reuters that these ratios were influenced by past stress events such as the 2023 collapse of Silicon Valley Bank, which led to the USDC stablecoin temporarily losing its peg. She said those episodes helped justify setting the 40% threshold rather than a lower figure.
Jones suggested that regulators consider paying interest on part of the 40% placed at the UK central bank to support the sustainability of issuers’ business models. He argued that the UK could become a leading jurisdiction for stablecoins, but only if its regulatory framework remains proportionate and competitive relative to other markets.
Conclusion
The UK central bank is edging toward a more open stance on stablecoins, acknowledging the role of tokenized money in a “multi-moneyverse” while holding firm on the need to guard financial stability. Industry representatives welcome the BOE’s shift but continue to contest holding caps, bank-like capital rules, and non-remunerated reserve requirements. With a final policy still pending, the balance the Bank of England ultimately strikes between caution and competitiveness will shape whether the UK can position itself as a significant centre for stablecoin activity.
Disclaimer
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