Bank of England Signals Flexibility on Stablecoin Limits

The Bank of England has indicated it may reconsider proposed limits on stablecoin holdings following criticism from industry participants, suggesting regulators are open to adjustments as they refine the United Kingdom’s emerging framework for digital assets.

Speaking before the House of Lords Financial Services Regulation Committee on March 13, Deputy Governor Sarah Breeden said the central bank is “genuinely open” to revisiting the caps outlined in its consultation on regulating systemic sterling-denominated stablecoins.

Proposed Limits Under Review

The consultation, published in November 2025, proposed temporary limits on how much stablecoin users could hold. Under the draft plan, individuals would be restricted to £20,000, while businesses would face a cap of £10 million.

According to the Bank of England, the measures were designed to prevent large-scale shifts of funds from bank deposits into stablecoins, which regulators fear could affect the stability of the traditional banking system.

Breeden told lawmakers that the central bank is willing to explore “constructive alternatives” if industry participants can propose effective ways to manage those risks.

While many companies criticized the caps, she noted that fewer submissions offered practical alternatives that could address the central bank’s concerns.

Reserve Requirements for Stablecoin Issuers

The Bank of England’s consultation also proposed strict reserve rules for stablecoin issuers operating at systemic scale.

Under the framework, 40% of reserves backing systemic stablecoins would need to be held as non-interest-bearing deposits at the Bank of England, while the remaining 60% could be invested in short-term UK government debt.

Issuers transitioning into the regulatory regime would initially be permitted to hold up to 95% of reserves in government bonds before shifting to the final structure.

These proposals aim to ensure that stablecoins maintain strong backing assets and remain resilient during periods of financial stress.

Industry Concerns Over Costs and Enforcement

The proposed reserve structure has drawn criticism from some digital asset companies, which argue that holding a large portion of reserves in non-interest-bearing central bank deposits could impose significant financial costs on issuers.

Industry representatives have also raised questions about how the proposed holding caps would be enforced, particularly once stablecoins begin circulating across secondary markets.

Tom Rhodes, chief legal officer at digital asset firm Agant, said monitoring stablecoin ownership across multiple platforms and wallets could prove complex and administratively burdensome.

Others have called for closer collaboration between regulators and the industry as the rules are developed. Nick Jones, chief executive of blockchain company Zumo, suggested adopting short-term regulatory workshops similar to the Financial Conduct Authority’s “Sprint” model, which brings policymakers and industry experts together to explore technical challenges.

Divided Oversight Between Regulators

Under the proposed regulatory structure, oversight of stablecoins in the UK would be shared between two authorities.

The Bank of England would supervise systemic stablecoin issuers and monitor financial stability risks, while the Financial Conduct Authority (FCA) would oversee consumer protection and conduct rules for non-systemic stablecoin projects.

Companies issuing large-scale stablecoins could therefore fall under joint supervision from both regulators.

Next Steps for UK Stablecoin Regulation

The consultation process closed on February 10, and regulators are now reviewing industry feedback.

Draft rules are expected to be released in June 2026, with final regulations likely to follow later in the year.

The process marks an important step in the UK’s effort to establish a comprehensive regulatory framework for stablecoins as governments worldwide continue developing rules for digital asset markets.