The Bank of England is reevaluating its previous stance on stablecoins after Deputy Governor for Financial Stability acknowledged potential overreactions to regulatory concerns.
This shift occurs in response to growing criticism from cryptocurrency firms, which argue that the UK may hinder its competitiveness in digital asset innovation compared to other regions.
The central bank is now considering alternatives to the previously proposed limits on ownership and reserve requirements that have been deemed impractical by industry leaders.
#What Was the Initial Proposal for Stablecoins?
The earlier plan from late 2025 suggested restricting individual holdings of sterling-denominated stablecoins to £20,000 and setting a cap of £10 million for businesses. Additionally, it required issuers to keep at least 40% of their backing assets at the Bank of England, generating no interest, while the remaining reserves could be allocated to sovereign bonds and other liquid assets.
Research conducted by the Bank indicated that the £20,000 limit would impact approximately 94% of consumers, allowing the average user to hold about 2.1 times their monthly income in stablecoins. This restriction on business holdings could severely limit the operational flexibility of corporate treasury functions.
#How Significant Are Sterling Stablecoins in the Market?
Currently, sterling-based stablecoins represent less than 0.5% of the global stablecoin market, which totals around $318 billion, predominantly dominated by dollar-backed stablecoins such as Tether’s USDT and Circle’s USDC. Despite their minimal current presence, regulators believe pound-pegged stablecoins could offer substantial advantages for payment systems and financial infrastructure.
A report from Standard Chartered suggests that the overall stablecoin market could surge to $2 trillion by 2028, potentially generating up to $1 trillion in demand for US Treasury bills.
#How Do New Regulations Affect Competition?
In the United States, the GENIUS Act was introduced to provide a federal framework that offers greater operational leeway for stablecoin issuers. Meanwhile, the EU's Markets in Crypto-Assets Regulation has been active since mid-2024.
During the Bank of England's consultation period, which concluded in February 2026, feedback from cryptocurrency companies indicated that the proposed regulatory measures might drive stablecoin activities to offshore locations. This insight has led Bank officials to reconsider the competitiveness and feasibility of any initial regulatory proposals.
The Deputy Governor underscored industry feedback regarding these rules, acknowledging that unintended operational burdens could render UK stablecoins less attractive. The reserve requirements, which were developed based on stress scenarios observed during crises like the collapse of the Silicon Valley Bank, are now being reassessed to ensure that caution does not stifle innovation.