Bank of England is reconsidering parts of its proposed stablecoin regulatory framework after digital asset companies warned that strict reserve requirements and ownership limits could make pound-backed stablecoins difficult to scale and commercially unattractive.
According to reports, Deputy Governor Sarah Breeden said the central bank is reviewing whether temporary holding caps on sterling stablecoins are necessary and whether reserve rules proposed in earlier consultations are too restrictive for issuers.
Under the Bank of England’s November 2025 consultation proposals, individuals would have been limited to holding £20,000 of a single UK stablecoin during an initial transition phase, while corporate holdings would have faced caps of roughly $13.5 million.
Officials originally argued the limits were designed to reduce the risk of rapid deposit outflows from commercial banks if stablecoins became widely used for payments and settlements.
The consultation also proposed that stablecoin issuers hold at least 40% of their reserve assets in non-interest-bearing deposits at the Bank of England, with the remaining backing invested in short-term UK government securities.
Industry participants pushed back strongly against the framework, saying the holding caps would be difficult to enforce across decentralized wallets and trading platforms. Firms also argued that forcing issuers to keep large balances at the central bank without earning interest would significantly weaken the business model for UK-issued stablecoins.
Breeden has consistently advocated for strict oversight of stablecoins, arguing that digital payment instruments functioning like money should meet safety standards comparable to traditional financial infrastructure.
At the same time, UK regulators are facing growing pressure to ensure the country remains competitive as jurisdictions such as the United States move more aggressively to support stablecoin development.
Andrew Bailey recently warned that international regulators could face major disagreements with Washington over future stablecoin oversight and global payment standards.
Bailey, who also chairs the Financial Stability Board, reiterated concerns that some stablecoins may struggle to maintain redemption stability during periods of financial stress, particularly if dollar-backed stablecoins expand globally without strong safeguards.
The debate comes as the U.S. advances the GENIUS Act, which supports the development of regulated stablecoin issuers. Meanwhile, sterling-backed stablecoins still represent only a small share of the global market compared with dominant U.S. dollar-pegged tokens.
Any easing of reserve requirements or holding limits by the Bank of England could significantly influence whether regulated pound-backed stablecoins become viable for payments, treasury management, and institutional settlement in the UK financial system.
