The Bank of England (BoE) has indicated it may revise its proposed regulatory framework for pound-denominated stablecoins following criticism from the digital asset industry, signaling potential flexibility as the United Kingdom works toward a formal regulatory regime for crypto-backed payment tokens.
BoE Signals Willingness to Adjust Proposed Rules
Speaking before the UK Parliament’s Financial Services Regulation Committee, Deputy Governor Sarah Breeden said the central bank is “genuinely open” to modifying its draft rules if alternative measures can achieve the same financial-stability objectives.
The Bank launched a consultation in late 2025 outlining how “systemic” sterling-denominated stablecoins—those widely used for payments—would be regulated in the UK. The proposed framework is designed to ensure that digital tokens pegged to the British pound remain safe, fully redeemable, and capable of operating without posing risks to the financial system.
However, the proposals have drawn criticism from crypto companies and fintech firms that argue some measures are overly restrictive and could limit innovation.
Key Proposed Requirements Under Review
The BoE’s consultation outlined several rules aimed at protecting financial stability. These included:
- Requiring stablecoin issuers to hold at least 40% of reserves as deposits at the Bank of England.
- Allowing the remaining 60% of backing assets to be invested in short-term UK government debt.
- Introducing temporary holding limits, including a £20,000 cap for individuals and £10 million for businessesfor a single systemic stablecoin.
These limits were intended to prevent rapid shifts of deposits from traditional banks into stablecoins, which regulators fear could disrupt bank funding and lending.
Industry leaders have argued that such restrictions could make the UK less competitive compared with jurisdictions such as the United States and the European Union.
Industry Pushback Prompts Reconsideration
Several crypto firms and fintech groups have raised concerns that the proposed holding caps and reserve requirements could hinder adoption and discourage companies from issuing pound-backed stablecoins in the UK.
Breeden acknowledged the criticism and encouraged the industry to propose alternative safeguards that would still protect the financial system. While the Bank has received feedback criticizing the proposals, officials noted that detailed alternative frameworks from industry participants have been limited so far.
UK’s Broader Stablecoin Regulatory Framework
Under the UK’s planned system, non-systemic stablecoins will primarily be regulated by the Financial Conduct Authority (FCA), while larger stablecoins designated as “systemic” by HM Treasury will fall under the supervision of the Bank of England.
The UK government has been working to establish a comprehensive regulatory structure for digital assets as part of its ambition to become a global hub for fintech innovation and blockchain-based financial services.
Stablecoins—cryptocurrencies designed to maintain a stable value by being pegged to fiat currencies like the pound or U.S. dollar—are increasingly viewed as a potential tool for faster payments and settlement systems.
Next Steps for UK Stablecoin Regulation
The Bank of England is expected to release updated draft rules for consultation in June 2026, with final regulations potentially introduced by the end of the year.
Regulators say the goal is to strike a balance between encouraging innovation in digital payments and ensuring that the rapid growth of stablecoins does not undermine the stability of the UK financial system.
As discussions continue between regulators and industry stakeholders, the final framework could play a significant role in determining whether the UK becomes a major hub for pound-backed stablecoin issuance and blockchain-based financial infrastructure.
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